National Research Corporation Stock

Hello, everyone. Thank you for joining us, and welcome to the NRC Q2 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Jordan Freeman, NRC Health's Chief Accounting Officer. Jordan, please go ahead.

Thank you, operator. Welcome to NRC Health's Earnings Conference Call for the second quarter ended June 30, 2026.

I wanted to first let you know that we posted our earnings press release to the Investor Relations section on our website. On this call today, we have NRC Health's CEO, Trent Green; and CFO, Shane Harrison.

Today's call will include statements related to the expected future results of our company, which are therefore forward-looking statements. Actual results may differ materially from these expectations due to a number of risks and uncertainties, including those described in our earnings release and other SEC filings. We will also reference non-GAAP financial measures. Definitions and reconciliations to the most comparable GAAP measures are provided in our earnings press release, which is available on our Investor Relations website. A replay of this call will also be posted to the same website.

With that, let me turn our call over to our CEO, Trent Green.

Thank you, Jordan, and good afternoon, everyone. Thank you for joining us for NRC Health's Second Quarter 2026 Earnings Call.

Today, I'll begin with an overview of our second quarter performance, discuss the momentum we're seeing across the business and highlight how we continue to advance the next chapter of the NRC Health story with innovation across our product portfolio.

We delivered another strong quarter of execution in the second quarter, reflected in our year-over-year total recurring contract value, or TRCV, and revenue growth. During the quarter, TRCV increased 11% year-over-year with diversified growth across the business. Experience TRCV grew in the mid-teens compared to the prior year, driven by strong bookings activity during the first half of this year. Also notable in the quarter was the Governance Institute, which achieved its strongest bookings performance in 7 years and grew its TRCV by nearly 10% year-over-year. This performance reinforces our conviction that health care leaders increasingly value trusted strategic guidance alongside technology-enabled solutions.

Our TRCV growth reflects more than market demand. It demonstrates the effectiveness of our strategy. The sales organization we redesigned around buyers continues to perform well, enabling deeper engagement across Experience, Market Insights and the Governance Institute. By aligning with how health systems make decisions, we're creating larger, more strategic relationships and expanding our opportunity to deliver value across the enterprise. We're also seeing encouraging returns from our continued product investments, particularly those that connect experience measurement with experience improvement. Those capabilities were a key differentiator in the landmark multi-solution agreement we discussed last quarter and continue to resonate with health care organizations looking for partners who can move beyond insight to measurable action.

Turning to our financial performance. Second quarter revenue increased approximately 4% year-over-year and 2% sequentially, despite an approximately 2-point headwind from an accounting change related to certain reputation monitoring solutions, which Shane will discuss in greater detail. Adjusted EBITDA margin was 27%, consistent with the first quarter, as we continued investing ahead of revenue and implementation, customer success and product development to support our large first quarter win and a growing pipeline of opportunities. This performance is consistent with expectations we outlined last quarter. As planned, we maintained margins while building the delivery capacity required for the first phase of this multiyear engagement.

We continue to expect margin expansion in the second half of the year, as revenue increasingly reflects the TRCV growth we've generated. More broadly, our investment philosophy remains unchanged. We're investing deliberately in the capabilities to strengthen long-term customer relationships, accelerate product innovation and expand our competitive advantage. We believe these investments position NRC Health to deliver durable growth and attractive incremental margins as these programs mature and scale.

Product innovation remains one of our highest strategic priorities. And during the quarter, we continued to strengthen our solution families. Beginning with the Governance Institute, we've expanded our capabilities by engaging in a refresh of our board assessment tools, increasing our benchmarking capabilities and developing board effectiveness resources that help health care boards and executive teams govern more strategically. We believe governance is becoming an increasingly important differentiator as health systems navigate unprecedented financial, workforce and regulatory complexity, and we're investing to ensure the Governance Institute remains the trusted partner for health care leadership.

Within the Experience family, we're particularly excited about the recent launch of ambient listening with agentic AI and a rounding solution. Rather than having frontline leaders use clipboards and static question sets to engage with patients and document those conversations, our ambient listening feature allows them to remain fully present, while AI securely captures the interaction in the background, saving them transcribing time, automatically organizing conversations into meaningful summaries, identifying themes, surfacing service recovery opportunities and preparing documentation for review. Early deployments have demonstrated dramatically richer documentation and insights without increasing the time leaders spend rounding, a meaningful step forward in helping health care organizations move from measuring the experience after the fact to improving it in real time.

But perhaps the most exciting opportunity extends well beyond any single product release. Over more than 4 decades, NRC Health has been solely focused on health care and has built both deep client relationships and one of health care's richest and most interconnected experience data sets. We uniquely connect what consumers expect before they choose care, what patients experience throughout their care journey and how employees help shape those experiences from within the organization. No other organization can offer our laser focus in this breadth, depth and longitudinal history of health care experience data. That foundation creates a significant competitive advantage as AI continues to reshape our industry.

Our objective is not simply to apply AI to health care, it's to apply AI to one of health care's most differentiated data sets. By mining decades of interconnected patient, consumer, employee and market data, we can identify patterns, uncover drivers of loyalty and experience, predict opportunities for improvement and recommend actions with a level of context that generic AI models simply cannot provide, all of which can drive a virtuous cycle of higher consumer attraction, better patient outcomes, improved caregiver careers and higher customer return on investment.

In our view, this is the next evolution of human understanding. We aren't simply helping health care organizations understand what happened, we're helping them understand why it happened, what's most likely to happen next and what actions will create the greatest impact for patients, communities and caregivers they serve.

Stepping back, our strategy continues to be grounded in 3 elements: insight, engagement and enablement. Insight provides a continuous view into what patients, families, employees and communities expect and experience throughout their health care journey. Engagement aligns leaders and teams around what needs to change, supported by our customer success teams, partnerships like the one we recently announced with the Healthcare Experience Foundation and platforms like the Governance Institute. Enablement is where improvement happens through tools, workflows and practices that convert insight into better performance, which may be measured in improved patient and employee experience, stronger volumes and lower costs.

We believe we are increasingly differentiating ourselves in this industry, particularly in those engagements and enablement layers. Many players can generate data and dashboards, but fewer can help a health system act on what the data is telling them, especially when those answers are nuanced or financially meaningful. Our opportunity is to combine health care-specific intelligence, governance expertise and enablement tools to drive real behavior change across the thousands of care sites we serve. I'm proud of how our teams executed in the quarter, driving double-digit year-over-year TRCV growth, sustaining revenue momentum, advancing the Governance Institute offering and investing with discipline in delivery and product. The foundation is solid, our opportunity ahead is clear and health care industry's need for what NRC Health delivers, turning human understanding into meaningful, measurable action has never been greater.

And with that, I'll turn it over to Shane to walk through our second quarter financial results.

Thank you, Trent, and good afternoon, everyone. I'll take the next few minutes to walk through our Q2 2026 results, provide context on our profitability dynamics as we invest to support our TRCV growth and give an update on capital allocation, including our dividend and share repurchase activity.

Starting with TRCV. We finished the quarter with total recurring contract value of $151.9 million, up 11% year-over-year, reflecting continued strength across our Experience, Market Insights and the Governance Institute portfolios. Q2 revenue was up approximately 4% year-over-year and 2% sequentially. This included a roughly 2-point gross headwind related to a change in revenue recognition for several of our reputation management SKUs. This was due to the strategic replacement of a third-party vendor for some elements of these solutions, where the new arrangement requires net revenue accounting, which means the vendor's fees are offset as contract revenue rather than expense. Previous accounting was traditional gross revenue and expense recognition. This accounting change had a pronounced revenue impact in the second quarter, and we expect to see a smaller headwind in Q3 and Q4.

The relationship between TRCV and revenue recognition remains consistent with what we've described previously. TRCV growth leads revenue as implementations ramp, especially for larger multisite customers like the landmark win we discussed last quarter, which will begin to show revenue during Q3. We continue to expect that the strong TRCV performance we've posted over the past several quarters will support durable revenue growth as implementations mature.

Moving to profitability. Second quarter adjusted EBITDA was $9.4 million with a margin of 27%, which was essentially flat with Q1, in line with our expectation that margins would remain steady this quarter while we invest in delivery and customer success for our large new implementations. Year-over-year, EBITDA was 3 points or $900,000 lower, primarily driven by higher operating expenses tied to expansion in our delivery teams, ongoing product and platform investments and the normalization of certain corporate expenses following the executive team build-out we completed in 2025. These investments are intentional and aligned with our long-term growth strategy, and we expect margin improvement as revenue catches up to the TRCV we've already secured.

For modeling purposes, we expect third quarter revenue to increase sequentially and adjusted EBITDA margin to be approximately the same as the first half of the year due primarily to the timing of our annual customer conference occurring in September. And in the fourth quarter, we expect to see upside to our EBITDA margin as we scale revenue and see our operating expenses normalize from Q3. This underlying margin performance reflects the same discipline we've shown historically, funding growth initiatives while maintaining an attractive profitability profile.

Adjusted net income for the second quarter was $6.9 million and adjusted EPS was $0.31 per diluted share. The majority of the adjustments to arrive at adjusted net income in Q2 related to the previously announced acceleration of vesting of restricted shares and associated cash payments to offset personal taxes for 3 of our executives, which was done to honor the original intent of those 2025 share grants. Given that most of these expenses are nondeductible for NRC's taxes and due to the technical tax accounting related to allocating nondeductible items during a loss quarter, our Q2 tax provision will not be comparable to our second half provision. For both Q3 and Q4, we expect our effective tax rate to be approximately 40%.

And lastly, on the second quarter financial review. Our Q2 free cash flow was $62,000, which was $4.2 million higher than prior year as executive cash bonuses and CapEx related to our headquarters renovation declined year-over-year.

Turning to capital allocation. Our philosophy remains straightforward. We will be measured and disciplined in deploying cash to the highest return opportunities. Our first priority is investing in NRC, hiring and developing talented people, innovating new capabilities and supporting implementations that deepen customer relationships and expand our addressable market. Alongside these internal investments, we remain active in surveying various markets for possible acquisitions, gauging for opportunities that will strengthen our platform and deepen our expertise while assessing their ability to be accretive to our financial profile.

Additionally, we look to return capital to shareholders in diversified ways through our dividend and opportunistic share repurchases. During the quarter, we paid our regular quarterly dividend of $0.16 per share and we repurchased approximately 397,000 shares under our existing $60 million authorization. Our philosophy around repurchases is to act when we identify an attractive risk-adjusted return opportunity relative to our other investment alternatives, and we balance that use of cash with our prudent leverage profile. We'll continue to evaluate the relative attractiveness of internal investment, strategic M&A and share repurchases with the goal of compounding free cash flow per share over time.

Zooming out a bit on this Q2, these results reflect the balanced profile we aim to deliver: strong TRCV growth, returning to consistent revenue growth, maintaining attractive margins while funding our future and executing a thoughtful capital allocation strategy that supports long-term value creation for our shareholders.

With that, we'll open the line up for questions.

[Operator Instructions] Your first question comes from the line of Constantine Davides with Citizens.

I just wanted to drill in a bit on the bookings performance for TGI. Just talk a little bit about what's driving that and how does that translate into future revenue? And I guess more to the point, what's the scale of that business line today? And I know you said TRCV is growing 10% for that business line, is that the right way to think about growth over the near term?

Yes. Thanks, Constantine. This is Trent. I appreciate the question, and thanks also for picking up coverage on us. We're grateful.

Let me zoom out for a second on TGI, provide a little -- maybe some broader context on what's happening there and then kind of drill in on your question on where we are with TRCV and where we see growth. So the Governance Institute is a very unique asset. It's a differentiated offering with an existing base of clients in the hundreds. Building this product from scratch would be incredibly difficult. It's also a top-of-funnel purchaser, meaning this is a product that is bought by the CEO or the CEO and their General Counsel. So this gives us visibility at the top of the organization and therefore, a broader awareness of their organizational priorities.

It's also a little -- it's a bit clubby in a good way. CEOs want a network of peers that like organizations or to network with organizations that are facing [indiscernible] problems, and we help make those connections. In terms of the business fundamentals, it's -- the margin on this business is strong. We do need to upgrade some of our talent and service to the emerging value proposition for that product offering, but we'll do that in a thoughtful way and in sync with the growth signals.

And to your specific question, in terms of the overall, this is only about 10% of our business. So I don't expect it to significantly move top line, although we have in -- this is a product offering we've owned for 20 years. It's been an offering in the market for over 40 years, and it has had double the membership that we presently enjoy. So we see significant opportunities for growth. But I want to make sure that's measured with you. I don't anticipate it to be a significant top line mover for us, but it does create connectivity inside of organizations that's really important, important for us. It's a good brand, and it helps us establish a strong foothold for ensuring that those organizations at the highest levels understand our full suite of capabilities.

And relative to your question, similar to our other product lines, we now have a dedicated focused sales team on this product. We did not have a dedicated team previously. We now have dedicated leadership on sales. And what we're finding is that as we refresh the value prop, not only is it helpful to have a dedicated sales team, but we are increasingly finding that our members, current members or prospective members are calling their friends, excited about the things that we're attempting to do, and so it's generating some additional buzz and connectivity just through the network itself.

That's great color. I just wanted to shift gears a little bit, talk -- you referenced the landmark customer win, obviously, some investments ahead of standing that up. Wondering if you can just give us an update there? And then with respect to your pipeline, I guess, are you seeing larger deals, maybe not along the size of that, but I'm just wondering if you can comment on pipeline, how you'd characterize it with respect to demand for different solutions, average deal size, whatever else you'd want to highlight as well?

Yes, sure. Thanks. So we are now live with this landmark customer. We brought on the first 25 hospitals and a number of ambulatory sites earlier this month. So data is flowing through the pipe, so to speak. We also began to recognize revenue associated with this customer this month. We'll bring on the next tranche of facilities in October and will be fully deployed by the end of the year. They also purchased another product from us, a rounding platform. That's not yet recognized in our TRCV, and that's expected to kick off in the second half of 2027.

So that engagement is well underway. We did, as we noted during our first quarter call, bring on some additional resources to help support onboarding of this customer. We also intend to jointly announce this partnership publicly in the next couple of weeks. So we won't be as vague about who this is. And in fact, I'll be on site with their leadership team next week. So that engagement is going quite well.

In terms of sales pipeline, so there's not a lot of deals of this size coming to market every quarter. That being said, our pipeline generation has been strong. Our pipeline is up 60% higher than it was same quarter last year. I will say in the pipe, the average deal size is down. It's -- and that's just reflective of the size of the organizations that are actively coming to market. We somewhat expected some of this given some of the near-term unknowns associated with the Qualtrics and Press Ganey acquisition. There's a little uncertainty in the market right now among buyers. So the average deal size that we're seeing is down.

We do look at -- and we look at a number of metrics with our sales team, particularly associated with the reorg that we executed last year. And we are seeing a significant increase in the number of meetings that we're getting access to and in particular, on-site meetings. So we're up by 35% on sales activity. So all those leading indicators to us appear to be very, very solid. So pipe is up, size of pipe, average deal size in that pipe is down. And just we don't see deals like the one we landed in Q1 coming up every quarter. But certainly, we'll be in the mix when those opportunities do present themselves.

Okay. One more for me, and I'll hop back in the queue. But Shane, you called out the 2-point headwind from the gross to net adjustment, which I get to around $1.5 million. I just want to understand, is TRCV because of that as well, is that apples-to-apples sequentially with what we saw in the first quarter or is a little bit of adjustment there as well?

Yes, it is still apples-to-apples. We have a policy on TRCV and the policy is a gross treatment. So we did not adjust TRCV for what you saw here. You're about -- you're approximately right. The annual amount is about $1.5 million. So it's not going to move any needles really, either on the margin standpoint or at the TRCV level. So we -- again, we're following our policy. We kept it where it's at. It's just affecting revenue as it flows in.

Your next question comes from the line of Jeff Wilson with Atlanta Capital.

I have a couple of bigger-picture questions. First, related to AI and then a follow-up if time permits. On the revenue side, can you just elaborate on your -- on the early monetization strategy for the agentic AI features that you're talking about? Are they being positioned as premium add-ons or the current subscription model or primarily a retention tool to drive a higher ROI for your existing partners?

And then on the cost side, are there specific areas -- as we think about longer-term future margin prospects, are there specific areas within the customer success or data processing where AI is allowing you to scale your operations more efficiently, and we should see that more as revenue growth begins to accelerate?

Yes, Jeff, this is Trent. Thanks so much for the question. So we don't presently have an AI SKU for our agentic tool that's embedded in our rounding product. So you subscribe to rounding and it is part of the offering. So we see -- presently, we see our AI innovations as more powerful features that we've added to our solutions to further differentiate NRC and improve our win rates and retention. And still, to our knowledge, we're the first -- certainly the first and I think still the only rounding platform that has this capability enabled.

We will -- or we are, I should say, actively evaluating other opportunities to monetize some of the thinking that we have around how we apply AI and where we insert AI into our products. So as you referenced, perhaps some premium-type add-ons, we're not there yet. So that's where things stand presently in terms of customer-facing AI. We are absolutely looking at ways in which AI can make our customer team success and implementation teams more efficient and effective. So we've assigned engineering resources and product resources to our customer success team so we can evaluate areas where we are ingesting data and can do it more efficiently and effectively.

And I do, in fact, believe that we will see over time some improvement in our cost to serve. May not result in an overall reduction in headcount because I'm anticipating we want to continue to grow the business. I just anticipate that we'll be able to service the business in a more efficient and effective manner.

Okay. And then secondary question on the competitive front. So following the -- and it's a good segue given your comments, but following the completion of the acquisition of Press Ganey by Qualtrics, just curious, how do you feel about NRC's competitive moat with this new competitive environment? And you mentioned some uncertainty in the marketplace, so are you seeing any shift in customer sentiment or RFP requirements now that your largest competitor is integrated into a broader experience management platform?

Yes. Jeff, thanks. Overall, I feel great about NRC and where and how we are positioned and where and how we're differentiated -- are and will continue to differentiate ourselves. It is still really, really fresh. The deal closed on May 18. I would say, just in terms of market sentiment to respond to that, the early effect is this has caused some customers who are in active RFP processes to pause and reassess. And specifically, we've been engaged in 2 processes where prior to closing, it was NRC, Qualtrics, Press Ganey who had proposed. Post closing, they've created an opportunity for Press Ganey and Qualtrics to submit a unified proposal.

Those evaluation processes are still in motion. So I can't assess what the buyer reaction to that combined proposal has been. So I think generally, what's happened is we've entered an era of buyer uncertainty relative to what exactly materializes from the combination and what products and services are available and in what form. And therefore, I can't get really specific with you on kind of their emerging value proposition and how in which we differentiate because, frankly, it is uncertain. I do see this as temporary. I don't have a crystal ball as to how long this is going to be before the market has greater clarity.

But for us, it means we can continue to build our pipeline. As I mentioned earlier, our Q2 pipeline grew 60% and we can focus on communicating what we believe are our strategic differentiators, particularly our rounding the Governance Institute, our consumer intelligence platform of market insights complements experience insights for a really holistic experience and brand improvement strategy.

Your next question comes from the line of [ Josh Peters ] with [ Shiba Insight LLC ].

Congratulations on another solid quarter, better than solid, I'd say, of execution.

I'm curious if you have any more color that you might add to what Qualtrics and Press Ganey may be communicating to customers in terms of potential changes to their existing platform, if they're planning a systems integration, anything that would shake up the marketplace still a little bit further? The way I've approached it is NRC offers certainty because you already have a fully stood up platform. So what more are you hearing from perhaps customers and potential prospects on that front?

Yes, [ Josh ], thank you. And yes, we agree. We offer certainty where there is uncertainty. It's interesting, [ Josh ], it's ambiguous. We've heard of customers who are on Press Ganey that have some interest in Qualtrics, but they're not being given any indication as to whether there's a -- or what the platform migration plan is. We have heard, at least in those -- I mentioned the 2 deals that have been kind of paused for reassessment, we do know in one of those very clearly that it's currently a Press Ganey customer, they have been given what the Qualtrics transition -- platform transition would be to Qualtrics. But there's not been, at least that we've heard of, any kind of overarching communication plan on what they're doing with their platform strategy.

Okay. And then by way of a quick follow-up question. Shane, you mentioned the tax rate is going to be unusual here affected by some of the nonrecurring activity here in Q2. What's a good normalized number to think about in 2027 and beyond?

Yes. There's some of the activity that has happened in Q2. And you can see the impact last year, too, when we had the similar kind of bonus structure, you can see what it did to the tax rate. So yes, there's several -- a significant amount of the accelerated vesting and the bonuses are not deductible. So it's jumping up our effective tax rate. We'll watch that through, right? By the end of the year, we'll be through that. A good way that we model ourselves is we're at the high 20s is how we do our effective tax rate. Now that's not cash taxes. That's the effective. On the cash side, it's usually a little bit lower than that. But I think, call it, 28%, 29% at the effective level and then on the actual cash going out the door, it's probably more in the lower to mid-20s.

Your next question comes from the line of John Lewis with Willis Investment Counsel.

Congratulations on another solid quarter. I was curious to hear a little bit more about how these new service offerings are being allowing you to access customers more and potentially how that's impacting TRCV growth?

Yes. Thanks, John. You broke up just a little bit. It's hard to hear how new -- are you referring to our announcement with the Health Experience Foundation or our rounding platform? Can you just help me I want to make sure I'm precisely addressing your question.

[indiscernible] adding additional rounding capabilities and things like that, how is that allowing you to engage?

Okay. Yes. Got you. Thank you. Yes, so these are -- as I think about our rounding offering, some of the work that we're doing on a tool we call Improvement Navigator, these are all tools that move from helping organizations, our customers move from insights about their business and how customers, patients, employees are experiencing their business to improving that experience. So rounding is very much an engagement tool with frontline leaders. And so what happens is you actually expand the number of individuals that are actively using on a day-to-day basis NRC tools because they become embedded in daily workflows for an organization.

So we start to become, in my view, even stickier with organizations. So irrespective of capturing the insights, although the insights that is doing the surveys is still important to us. Where we really become sticky with organizations is when we can get more embedded in their daily operations and workflows. And that's where I see as a, for instance, a rounding platform and a couple of other emerging product innovations that we're working on. We also -- as you might have seen, we announced in June a partnership with an organization called The Health Experience Foundation.

This is an organization that's been in operation since 2017. It's led by an individual who has a historical connection to Quint Studer and Quint Studer as a big name brand in health care. It may not mean anything to you, but it means a lot to leaders in hospitals and health systems. And we see this partnership as further reinforcing our engagement and enablement pillars of what we do. So this is an experienced team of clinicians, operators, executives. They're collaborating to connect governance, leadership development and frontline enablement to help us translate our human understanding into really practical operating disciplines and sustain improvement.

Because ultimately, in my view, that's what this is about. It's about producing the outcomes and the more we can demonstrate that our tools become embedded in daily workflows that produce positive outcomes, whether those are just improvement in patient satisfaction scores or whether they start to drive quality improvement, safety improvement, workforce engagement, more efficiency in day-to-day operations, all of that is great stuff. But we see this relationship with HX Foundation is further blossoming into one where we can kind of bake them in as part of a deeper advisory capability tied to our key products and services, further advancing what I'm talking about here with engagement driving to improved outcomes for our customers.

That makes sense. And where do you feel [Technical Difficulty] new customers to be able to have them buy multiple solutions from you?

Yes. I'm sorry, John, again, you cut out. I think you were asking about where we are relative to customers buying multiple solutions?

That's correct. I'm sorry, I'm traveling. Hopefully, you can hear me a little better now.

No, no, not at all. No, no worries. I just want to make sure I get the question right. So yes, cross-sell is a big opportunity for us. I mean the large Q1 deal that we announced, just as a reminder, was a cross-sell. There was a customer that already bought a product from us, and now we've sold in both our experience measurement tool as well as the rounding tool. We still have a very long runway of cross-sell opportunity in our base. So 70% of our customers only buy one product from NRC today or roughly, I think it might be 71 customers or something buy only one product. So we have a lot of opportunity to grow there.

And we're spending -- as I mentioned in our Q1 call, we're working really hard to strengthen the connected tissue between our product families to facilitate these cross-sell opportunities. And as I mentioned to start the call, as I reflect on the opportunities with the Governance Institute, I see that as a -- we're entering at a high level of the organization and have an opportunity to expose that high level to our full suite of products. Our CEOs don't typically buy. They may be involved somewhat in the buying process, but they don't typically purchase. It's generally delegated to a different leader. They don't generally purchase a patient experience measurement solutions.

But by strengthening our connectivity at that level, we can start to expose the full breadth and depth of our capabilities. So the 2 kind of leaders that I see there for us opening those doors are the Governance Institute and our consumer intelligence product that we refer to as Market Insights. So anyway, a long way to go, big opportunity for us, and it's all about strengthening the connected tissue and the cross connections between our product offerings.

Perfect. Sorry for the technical difficulties.

Not at all, John, thanks so much. Glad you were able to join.

There are no further questions at this time. I will now turn the call back to Trent Green for closing remarks.

Well, thanks all for joining the call today, and thanks for the questions. In closing, I'll just reiterate, we're confident in the foundation of the business. We're encouraged by the momentum in our product portfolio and customer relationships, and we're committed to sound execution and capital allocation that will drive long-term value for our shareholders. So I'm grateful to our incredible NRC associates for their commitment, to our customers for their trust and to our shareholders for your continued support. Thanks for your time and interest in NRC Health.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to NRC Health Q1 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Jordan Freeman, VP of Finance. Jordan, please go ahead.

Thank you, operator. Welcome to NRC Health's earnings conference call for the first quarter ended March 31, 2026. I wanted to first let you know that we posted our earnings press release to the Investor Relations section on our website.

On the call today, we have NRC Health's CEO, Trent Green; and CFO, Shane Harrison.

Before getting started, I'd like to emphasize that this call will include statements related to the expected future results of our company, which are therefore forward-looking statements. Our actual results may differ materially from our expectations due to a number of risks and uncertainties, including those described in our earnings release and other SEC filings.

Today's remarks will also include references to non-GAAP financial measures. Additional information, including definitions and reconciliations between GAAP financial information and non-GAAP financial information is provided in the corresponding earnings press release, which is posted on NRC's Investor Relations website. A replay of this call will also be posted to the same website.

With that, let me turn this call over to our CEO, Trent Green.

Thank you, Jordan. Good afternoon, everyone, and thank you for joining us for NRC Health's First Quarter 2026 Earnings Call. Today, I'll start with an overview of our Q1 performance, highlight the momentum we're seeing in the business and discuss the next chapter of the NRC Health story.

We kicked off 2026 with strong sales and adjusted EBITDA performance. Our total recurring contract value or TRCV, increased 13% year-over-year to an all-time high of $152 million, which is $8 million higher than where we finished Q4 2025. Q1 new sales bookings were up over 200% year-over-year, driven primarily by a landmark deal I'll describe in a moment, augmenting the strong sales performance was improved customer retention where our gross retention rate reached its highest level in over 7 years, driven by product and feature enhancements, more consistent engagement with our customers and clear articulation of the outcomes our solutions deliver. Revenue returned to positive year-over-year growth for the first time since 2023, increasing 4% to $35 million, and we improved our adjusted EBITDA margin sequentially by 2 points to 27%.

A key highlight from the quarter was the signing of the largest deal in NRC Health's history. This agreement is both a validation of our strategy and a proof point of our differentiation in the market.

Importantly, this was not an experienced measurement purchase. It was an experienced improvement decision based on our demonstrated capability to turn experienced insights into tangible action that drives outcomes.

We believe this customer selected NRC Health based on several factors. First, our solutions breadth. This organization purchased multiple SKUs across our experience and enablement product families, reflecting confidence in our ability to support a broad set of use cases on a unified platform.

Second, our expertise and outcomes. They were specifically seeking in the moment, patient feedback, higher survey response rates and clear guidance and tools to support process improvement, areas where we have a proven track record.

Third, how we work. This customer is seeking straightforward pricing and a streamlined contracting process, along with a highly effective ongoing support model. You'll hear more from Shane in a few moments about the financial implications of this deal.

As encouraging as these results are, they're only part of the story. They reflect deliberate choices about who we serve, how we show up for our customers and how we intend to grow over the long term.

On April 1, we celebrated our 45-year anniversary as a company, which prompted a simple question, what does the next chapter of NRC Health look like? Since day 1, NRC has been driven by a simple but demanding belief, health care improves when every patient, family member and caregiver is understood as an N of 1. That belief, which we call human understanding, remains foundational for our next step of enabling the actions that drive change.

The environment our customers operate in makes that foundation more important than ever. Health systems are facing sustained financial pressure, workforce fatigue, rising consumer expectations, rapid technology change and continued consolidation. Expectations are rising, while margin for air is shrinking.

In that context, our role is to bring clarity and increasingly to drive action. Our value proposition remains grounded in 3 elements: insight, engagement and enablement. Insight provides a continuous view into what people expect and experience. Engagement aligns leaders and teams around what needs to change. And enablement is where improvement happens through tools, workflows and operating practices that translate insight into better performance.

Enablement is where our differentiation is most evident. Many players in our space can generate data and dashboards, we believe far fewer can help the health system act on what the data is telling them, especially when the answers are nuanced, uncomfortable or financially significant. Our opportunity is to combine health care-specific intelligence with relationships, governance best practices and enablement tools to support real behavior change across the thousands of care sites that rely on our platform.

Looking ahead, we've outlined a few clear commitments. First, we aim to be the trusted guide for what I would call health care built certainty, giving our customers confidence that what they measure is accurate, defensible, secure and tied to better outcomes.

Second, we're committed to honoring the N of 1 heart of NRC Health at scale, ensuring that AI and automation reinforce not erode, the expectation that every patient, family and employee is seen and understood.

Third, we're investing to strengthen enablement, building on solutions like rounding and the Governance Institute to add operational tools that make continuous improvement part of the daily fabric of our customers' organizations.

Underpinning all of this is how we think about stewardship for owners, associates, customers and ultimately patients. Our shareholders should see disciplined execution, thoughtful capital deployment and a long-term mindset. Our associates should experience a culture where stewardship is lived in how we lead and operate. Our customers should feel continuity, humility and a focus on building their capabilities. And we remain mindful that in health care outcomes are fundamentally human, measured in dignity, trust and lives improved.

I didn't step into this role to change the story of NRC Health. I stepped in to extend it. Our goal is to be known not only for measuring experience, but for helping our customers turn human understanding into measurable, repeatable improvement with rigor, with defensibility and with humanity intact.

With that strategic context in mind, let me turn the call over to Shane to walk through our first quarter financial results. Shane?

Thank you, Trent, and good afternoon, everyone. I'll take the next few minutes to walk through our Q1 2026 results, provide context on our margin dynamics and then discuss our capital allocation priorities and how that relates to our recent share repurchase authorization.

Starting with Q1 TRCV. We finished the quarter at $152.1 million, an increase of 13% year-over-year and 5% sequentially. This marks our sixth consecutive quarter of sequential TRCV growth and our largest single quarter increase in at least 7 years, reflecting our team's strong execution across sales, customer success and delivery. Two key drivers were the landmark win that Trent described for our patient experience and rounding solutions and the continued strengthening of our gross retention rate.

Turning to revenue. Q1 revenue was $34.8 million, up 4% year-over-year. As Trent noted, this is our first year-over-year revenue growth since 2023, and it is consistent with the TRCV growth trend we experienced in 2025, where we posted positive year-over-year growth in Q3.

The lag between TRCV and revenue recognition is expected given our implementation processes, which can be extended when we win sizable multisite customers like the large Q1 deal.

First quarter revenue did show a slight sequential decline from Q4 due to seasonality related to conference and point time survey revenue.

Moving on to profitability. Q1 adjusted EBITDA was $9.4 million, representing a 27% margin, which was 230 basis points higher than Q4.

Comparing year-over-year, EBITDA margin was lower than Q1 2025 due to higher operating expenses tied to our executive team expansion, which is now complete, higher corporate expenses due to isolated brand and tax studies and typical annual merit increases. And because revenue trails TRCV, we expect margin improvement to come as revenue catches up to TRCV over the next few quarters.

First quarter adjusted net income was $4.6 million, resulting in an adjusted EPS of $0.21 per share, up $0.05 sequentially from Q4.

Free cash flow was up nearly 50% year-over-year to $5.3 million or $0.24 per share.

During the quarter, we paid a dividend of $0.16 per share, consistent with our ongoing commitment to returning capital to shareholders while continuing to invest in growth.

Now looking ahead a bit. As Trent mentioned, the landmark Q1 win is a meaningful growth catalyst. The multiyear agreement is expected to be implemented in 2 phases. Phase 1, representing our experienced measurement platform, has a planned go-live in Q3 2026 and represents roughly half of the total expected annualized revenue. And Phase 2, consisting of our enablement platform, is currently planned for Q3 2027, and represents the other half of the total expected annualized revenue.

In the near term, we will be expanding our delivery and customer success teams in Q2 and Q3 and to provide a high-quality implementation across their hundreds of hospitals and outpatient facilities. The agreement is expected to be accretive to overall company margins, although less so in the near term, given most of the implementation expense is concentrated in Phase 1. We expect higher contribution margins after Phase 2 go-live given the limited incremental implementation costs.

From an overall company perspective, we expect these rollout costs will keep our adjusted EBITDA margin flattish sequentially in Q2 with margins beginning to expand in Q3 and beyond as overall revenue begins to more fully reflect our recent TRCV trend.

On a separate note, in Q2, we expect to record a $9.4 million charge due to changes we disclosed today to 3 of our executives 2025 restricted equity agreements that will accelerate the vesting of those granted shares. These changes were made to honor the original intent of aligning these executives with shareholders by delivering fully vested shares with tax basis. A subsequent tax analysis identified personal tax uncertainties for these executives that these changes corrected.

While not impacting adjusted EBITDA, this $9.4 million charge is made up of $6.5 million of noncash stock compensation expense, representing the acceleration of the remaining stock compensation under the 2025 grant which would have been recognized ratably through 2028. The charge also includes $2.8 million of cash bonuses to fund the personal taxes due on the acceleration, which is consistent with our bonus methodology from the original 2025 grant.

Turning now to capital allocation. With our goal of maximizing long-term free cash flow per share in mind, our capital allocation philosophy is straightforward. Our #1 priority is investing in NRC. We are continuously evaluating the needs of the business vis-a-vis our long-term strategies in the market environment, and we will execute on those initiatives that exhibit the highest risk-adjusted returns.

Alongside this internal assessment, we are evaluating our markets for strategic and accretive acquisitions where we can enhance our platform and expertise. We pursue M&A with clear criteria and financial discipline, and we view it as an important lever in our capital allocation framework.

From there, our next area of focus is returning capital to our shareholders. We do this directly through dividends and indirectly through opportunistic share buybacks. These buybacks can represent a compelling use of cash to enhance total per share returns, depending on where our shares are trading in relation to our view of intrinsic value.

In March, we announced a $60 million share repurchase authorization from our Board. We intend to be strategic in deploying capital under this authorization while maintaining a manageable leverage profile. We believe our current leverage is prudent and we have capacity to borrow if we see high ROI opportunities in any of these areas I've mentioned that support our long-term value creation plan.

With that, we'll open up the line for questions.

[Operator Instructions] Your first question comes from the line of J.P. Gurnee with Gurnee Group.

You've highlighted that you're already serving 70% of the top 100 health systems in the U.S. yet about 70% of those customers are only using a single product, that seems to suggest a pretty significant expansion opportunity from your existing base. Could you speak to how you're thinking about the expansion opportunity and what changes you've made to your go-to-market strategy to capture this? And in particular, how your approach has evolved from what's been historically maybe more of a siloed engagement model to 1 that is more demonstrating the value of an integrated product operating across your -- the broader enterprise?

Yes, absolutely. J.P., thanks for the question. So if I zoom out for a second, we attribute much of our go-to-market success over the last year to the reorganization of our sales enterprise to get more single-threaded on individual products as well as our additional hiring to fill out those teams. And when I talk about individual products, I'm talking about experience, market insights, the governance institute. It's been in response really to clear buying center differences for those products. And based on our work here over the last 10 months or so, I'm really pleased with our coverage of the market and the pipeline that we're creating. Our pipeline is up 41% in the quarter versus prior year.

But to your question specifically about the significant opportunity to pursue white space within our customer base, we have been working to more explicitly mine the interconnectedness between and among our products. In fact, actually, the landmark deal that we discussed is reflective of this. That was a customer who had been a longtime buyer of our Market Insights product and to it, now we add our experienced platform and our enablement platform with our rounding product.

What we've tried to do, J.P., is to catalyze cross-product sales conversations. We've engaged our research team. They've designed an analysis for instance that we refer to as the trust gap that illustrates the performance and often improvement opportunity for an individual organization's facility. So think of their hospitals or you could even look at it on a service line basis, cardiovascular cancer, children's, et cetera. It compares consumer sentiment for those hospitals or for those service lines to actual patient experience within those hospitals or within those service lines. That analysis has opened a number of doors. And by the way, this was an analysis that we utilized as part of the sales process with that landmark win.

So we're mining the data that we already have to extract opportunities to have conversations and illustrate the power of connecting these 2 data sets. And similarly, we're discussing as part of our Governance Institute member network, how to bring in consumer sentiment analysis or brand index into the board.

So we've just really heightened the conversations internally about where and how there's connective tissue between and among our products.

And maybe just 1 last point on this. On our go-to-market and cross-sells, our solution suite expansion and breadth is creating a lot of market conversation for us. In particular, our rounding solution that we acquired in 2024. It's -- that product is now a part of nearly every experience sale conversation that we're in. And so it's opening doors and outside of traditional RFP processes. Thanks for the question.

Our next question comes from the line of Will Nasgovitz with Heartland Advisors.

Congrats on the strong growth year-over-year. Nice to see that the sequential decline much less than we've seen previously. Also, the free cash flow number was higher than you were anticipating. Shane, can you just give us some perspective on what you think the CapEx outlook would be for the year? And then you touched a little bit on margins, but maybe just a little -- provide a little bit kind of incremental margin guidance, if any of you're willing to share at this time?

Sure. Yes, free cash flow was stronger. We had a -- it was a bit of an easy comp, but we did well. The building at CapEx is largely behind us, as I think you probably will know, there's a little bit of trickling here and there. But that was down quite a bit. So overall for the year, now that the building is behind us, think of CapEx to be around, call it, $1 million to $1.5 million a quarter. This quarter is a little bit higher. I think we had a little bit higher stock comp or not stock comp, capitalized software, which can move around a bit depending on product road maps and the long horizon projects that we're working on. But yes, going forward, call it, the 1.5.

And then the margin on the sequential basis, you saw us come up, Q4 was a soft year because of some conference spend that we have. But longer term, we mentioned going kind of being flat for Q2. Not a lot of -- we're going to see revenue increase. You're going to see revenue start to trend with TRCV, so we'll see some incremental -- we're expecting incremental margin or incremental revenue in Q2, which obviously will flow through after we deliver on that. But offsetting that, for the most part, is going to be this Phase 1 delivery cost that we mentioned for this landmark win, which is -- it's going to be great long term. It's going to be extremely accretive to our overall margin. But yes, there's going to be some upfront cost to make sure we roll that out correctly. And as the customer expects.

That's great. I'm just wondering, can I just ask more kind of a higher-level question for Trent here. 2 things in my mind that it would be used for you to maybe expand upon, one, the combination of your -- 2 of your competitors, is that opening some doors for you? And then maybe if you could just provide a little context for us investors that are sitting on the outside looking in, how NRC plays into the value-based care? It seems like daily you're seeing a lot of discussion around this and the importance of that. And just kind of if you could provide some context in perspective how you are part of that process?

Yes. So I guess on the first part, I mean, there are -- we anticipate that the landscape may change a little bit with Qualtrics and Press Ganey. That deal has not closed. We're still active in many conversations, which those 2 are competing as individual organizations. It has maybe slowed a few of our buying processes, but not done in any way significantly.

In terms of value-based care. Yes, I'm really confident in our product offering and market positioning as it relates to value-based care. Value-based care is really all about what it says, demonstrating value, value in outcomes, improvement and cost reduction. And I point to our tools that we're really driving towards that enable organizations to demonstrate improved performance. And by applying our tools, we're actually demonstrating cost savings for our customers.

So a few examples, and we're working with a few of our partners to quantify the time savings here, we have a service recovery tool that it used to be if somebody had a bad experience, and logged a bad experience, that might go to somebody in e-mail and then they have to read it and write a response or some follow-up and it could take, in my experience as a former Chief Operating Officer of a health system, it could take days. Our service recovery tool now will auto-generate messages for health system leaders that they can zip off. Oftentimes, in the path of care.

So we're demonstrating that our tools can actually relieve some administrative burden from our customers. And similarly, our rounding platform which is now enabled via ambient listening, ambient AI so that you don't even have to scribe a visit with a patient or caregiver any longer. It does it automatically and prompts you, that's just creating enormous savings. So I then apply that, Will, to fitting perfectly into the value-based care delivery framework that our customers are pursuing to enhance their outcomes and reduce their overall total cost of care.

Our next question comes from the line of Josh Peters with Lindberg Family Office.

Congratulations on landmark win, the TRCV progress pivoting into growth here. I appreciate it, especially very much the commentary to help shape our expectations for how things are likely to unfold here on the margin and sales front here this year. But I'd like to look a little bit further out into '27, '28, your longer-term financial model, what kind of longer contribution margin operating leverage type of improvement do you think that the business can sustain over the next couple of years?

Yes, Josh. This is Shane. So the business used to be in the 30s, right, on an EBITDA basis. We think absolutely we can get back to that low 30s in the midterm and even up into the mid-30s, probably longer term. How are we going to do that? Well, it's -- you got to start at the top line, right? So as long as we're growing that top line, that's -- at a reasonable rate, something more than 2% or 3%, call it, mid- to high single digits, we've got a strong business here with really good operating leverage built into it. So we think our goal is to take that growth, which we're investing in the business now, which you're seeing in some of the SG&A and the margin that you see currently to build even more operating leverage. So what we're trying to do is assuming that kind of mid- to high level, high single-digit growth rate, we think we can push down 40% to 50% of that incremental revenue down to the bottom line to the EBITDA line.

Why aren't we passing it all 3? Well, one, we got to deliver, right? So there's inherent variable delivery costs. So that comes out of the top. But from there, again, assuming we have a nice growth rate, and we see opportunity within the product, within our own go-to-market teams, we're going to reinvest in that. So think of that as some more product investment, some incremental sales and marketing investments, again, continue that, the bonfire burning, let's call it, on the TRCV growth.

So a long story short, you flesh that all down at 40%, 50%, you run that through for a few years. You're seeing us back into the 30s in the next couple of years. That's how we're being -- we're trying to be thoughtful about how we're reinvesting in the business with that growth.

Okay. That's very helpful. I appreciate it. And if I can sneak in a quick second question. Trent, I appreciate the commentary about the changes you've made in your commercial organization that's led to the improvement acceleration in TRCV. Can you talk to us a little bit more about the product enhancements? For those of us who are perhaps a little bit newer to the story, how the different enhancements to the platform, these multiple SKUs, as you referred to them, that are now available that perhaps weren't and perhaps we were lagging our competitors a few years ago. That certainly doesn't seem to be the case today. Can you talk about the service enhancements that brought us to this renewed growth?

Yes, sure. Thanks for the question. So we've been into the kind of the measurement of experience for a long time. So think about we're collecting insights. We're reporting insights back to health systems where we're really starting to drive. And this runs through our entire portfolio. It doesn't matter whether it's experience, whether it's market insights or whether it's the Governance Institute. We're driving the organization to move from just insights to action. And so some of the product enhancements that we have done take in our experience platform, the rounding solution, our service recovery solution, we're working with some customers now on a solution that helps to identify opportunities for improvement in a very micro level in their organization. So it's really laser-focused on not just reporting the news, but guiding to the actions that are necessary to make the improvements that will ultimately drive experience outcomes.

The same thing is true with the Governance Institute. We're -- this week, we have our 250th Governance Institute Conference in Scottsdale. We announced that we are refreshing our Board assessment tool, which is all about assessing the performance of your not-for-profit health system board. And is it designed. Is it ready for to address the challenges that your organization is experiencing. And then creating a road map for helping organizations improve their performance. So it's what we've started to do. Some of these are new SKUs, but some of these are also just enhancements within the product, that not just report kind of what the performance is, but drive to the next best actions.

Our next question comes from the line of J.P. Gurnee with Gurnee Group.

I'm all set. You can move on to the next participant.

All right. Wonderful. We have reached the end of the Q&A session. So I will now turn the call back to Trent Green for closing remarks.

Well, thanks so much for the questions. In closing, our Q1 results represent a strong start to 2026. We delivered double-digit TRCV growth, return to year-over-year revenue growth, maintain healthy profitability while funding our future and landed a landmark customer win that showcases our differentiation. We have a very disciplined approach to balancing investment for sustained long-term growth with profitability as reflected in our Q1 EBITDA performance and the choices we're making around product, delivery and go to market.

We are confident in the foundation of the business, encouraged by the momentum in our pipeline and customer relationships and we're committed to sound execution and capital allocation that drive long-term value for our shareholders.

I'm grateful for our incredible NRC associates for their commitment, to our customers for their trust and to our shareholders for their continued support. Thank you for your time and interest in NRC Health, and we look forward to sharing another update after our second quarter wraps up.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon. Thank you for attending today's NRC Fourth Quarter 2025 Results. My name is Victoria, and I'll be your moderator today.

I would now like to pass the conference over to Jordan Freeman. Thank you. You may proceed Jordan.

Welcome to NRC Health Earnings Conference Call for the Fourth Quarter ended December 31, 2025. I wanted to first let you know that we posted our earnings press release to the Investor Relations section on our website.

On the call today, we have NRC Health's CEO, Trent Green and CFO, Shane Harrison.

Before getting started, I'd like to emphasize that this call will include statements related to the expected future results of our company, which are, therefore, forward-looking statements. Our actual results may differ materially from our expectations due to a number of risks and uncertainties, including those described in our earnings release and other SEC filings.

Today's remarks will also be references to non-GAAP financial measures. Additional information, including definitions and reconciliations between non-GAAP financial information and GAAP financial information is provided in the corresponding earnings press release, which is posted on NRC's Investor Relations website.

A replay of this call will also be posted to the same website.

With that, let me turn our call over to our CEO, Trent Green.

Good afternoon, everyone, and thank you for joining us for NRC Health's Fourth Quarter and Full Year 2025 Earnings Call. Today, we'll review our fourth quarter and full year results, highlight the progress we're seeing across the organization and outline our strategic priorities as we head into 2026. Starting with the fourth quarter. We delivered another strong period of execution, driven by deep engagement and alignment across our teams. Revenue for the quarter was $35 million, and adjusted EBITDA totaled $9 million. Importantly, total recurring contract value or TRCV, reached $144 million, up 8% year-over-year and marking our fifth consecutive quarter of sequential TRCV growth.

With 99% of our revenue recurring, TRCV continues to be a reliable and predictable indicator of the revenue we expect to recognize over the next 12 months. This sustained momentum underscores the effectiveness of our go-to-market strategy and the strength of our value proposition as health care providers navigate an increasingly complex operating environment. Let me unpack what's driving this TRCV growth. At a high level, it reflects strong execution across our sales, customer success and product teams.

First, our sales team reorganization and refined coverage model are clearly delivering results. Full year new sales increased 86% year-over-year, driven by a selling approach that more closely mirrors how health care systems are structured and how decisions are made. This realignment has enabled us to engage more effectively at multiple levels within customer organizations and drive larger, more strategic relationships.

Second, our customer success teams have elevated the quality, depth and consistency of customer engagement. By strengthening relationships with key users and decision-makers we achieved the highest gross dollar retention rate we've seen in more than 7 years. Both new sales and retention have been further supported by continued investment in our product portfolio. Over the course of the year, we enhanced capabilities that directly address our customers' needs, whether that's enabling operational improvement through our enablement solutions or delivering deeper real-time insights that connect patient experience to health system outcomes.

In addition to the focus we've placed on our sales, customer success and product teams, we've also been intentional about strengthening our leadership team to support the next phase of growth. In early January, we welcomed David Burik to lead our strategic insights and governance strategy. With more than 30 years of experience in health care consulting, David brings deep expertise in governance, system transformation and strategic decision-making. He has advised integrated delivery networks, managed care organizations, physician groups and hospitals through complex change and previously led Guidehouse Center for Healthcare Insights. His experience and thought leadership uniquely position him to accelerate growth and innovation across our Market Insights platform and the Governance Institute.

David's addition is emblematic of our broader leadership build-out. Over the past years, we've intentionally recruited leaders who combine deep health care operations and solutions experience with strong subscription software and technology expertise. This blend is central to our strategy, pairing industry insight with the ability to scale technology-driven solutions so we can continue to deliver products that drive sustained results for our customers and the people they serve.

As I mentioned on last quarter's call, our customer value proposition is built on 3 pillars: clear and actionable insights; deep partnership and engagement; and enablement tools that help health systems turn insight into action. With that framework in mind, I'd like to highlight what differentiates NRC Health and why this value proposition continues to resonate in the market.

First, trust. We served 74% of the top 100 health systems in the country, and that scale is a direct result of the trust health care leaders place in our brand. We've reinforced our position as a secure, reliable and defensible partner through continued investment in data security and compliance, including our high trust certification. That trust is further reflected in our customer relationships with a Net Promoter Score of 68, driven by our differentiated customer success model.

Second, expertise. NRC Health was built specifically for health care. For nearly 45 years, we've partnered with providers and helped define patient-centered care. Our solutions are grounded in deep health care operations knowledge and that expertise translates into solutions that leaders can effectively use to drive action in their organizations. Additionally, through the Governance Institute, we engage C-suite executives and boards with insights, best practices and peer connections that inform decision-making at the highest levels of health care organizations.

And third, portfolio breadth, while market research and patient experience remain foundational, we built a broader and more powerful portfolio over time, now spanning 7 products across the following 4 solution categories. Our experience solutions, including patient experience, employee experience, reputation management and care transitions deliver actionable insights in how organizations serve and connect with patients and employees. Our enablement solutions help operationalize those insights by structuring and automating workflows and delivering personalized real-time guidance to frontline teams in the path of care.

Our strategic insight solutions, which include our market insights and community insights products provide health care leaders with intelligence on their competitive landscape by providing rich data on consumer preferences, brand perception and care delivery expectations that is continuously updated via our surveying of over 300,000 consumers annually.

And the fourth element of our portfolio, our governance solutions through the Governance Institute equip Boards and executive leadership teams with the frameworks, education and insights needed to strengthen organizational performance and long-term resilience. Together, these solutions create our differentiated insights, engagement, enablement flywheel. We capture insight into what patients, employees and communities expect and experience. We work with leaders to translate that insight into strategy, and we enable action through workflows, tools and best practices that deliver measurable, hard return on investment, creating a continuous cycle of improvement.

Now let me return to what I see as our most compelling growth catalysts as we head into 2026. First, our go-to-market restructure is already showing up in our sales activity and results. As this model continues to scale, I expect it to be a meaningful tailwind through 2026.

Second, we see continued opportunity to deepen adoption of our enablement solutions. Rounding represents our first major investment in this area. Just over a year ago, we acquired a workflow-driven solution designed to guide care teams toward high-value actions using both historical and real-time feedback, now fully integrated into our platform, Rounding has gained strong momentum with TRCV nearly doubling in 2025.

Importantly, the opportunity extends well beyond Rounding. Health care systems are actively seeking solutions to drive measurable operational improvement across quality, safety, discharge planning and other critical functions. We believe enablement will be a meaningful and durable growth engine for NRC Health.

Third, product innovation remains a strategic priority. We're investing in capabilities to deepen our differentiation, expand our addressable market and consistently deliver measurable ROI to our customers. AI is playing an increasingly important role in this work. We're using AI to drive greater depth and accuracy and sentiment analysis through comment summarization and our AI-enabled complement and service recovery capabilities. We've also announced a beta release of a new AI-powered listening capability within our Rounding solution, further enhancing the richness and timeliness of frontline feedback. Together, these innovations are helping our customers move faster from insight to action.

Fourth, cross-sell remains a meaningful growth opportunity. as we deepen relationships across our customers' organizations, we see clear potential to expand adoption of enablement, strategic insights and governance solutions.

Fifth, retention upside. Although, we experienced a 7-year high with retention rate, we see opportunity to strengthen our retention efforts as we harden the customer success initiatives we deployed in 2025.

And finally, new logo growth. Our differentiated data assets and insights open the door to new buyers, new use cases and new markets beyond our historical footprint. As awareness of our broader platform continues to expand we believe this represents a meaningful and long-term growth opportunity for NRC Health. As I reflect on 2025, I'm proud of what our team has accomplished, driving strong TRCV growth, improving customer retention, strengthening our leadership team and maintaining disciplined expense management. The foundation is solid and the runway ahead is clear. The health care industry's need for what NRC Health delivers, turning Human Understanding into meaningful, measurable action has never been greater. Health care leaders are navigating unprecedented complexity, and they need partners they can trust, with the expertise to guide them and the technology to enable them.

With that, let me turn it over to Shane to walk through our financial results.

Thank you, Trent. Today, I'll walk through our Q4 and full year 2025 results, then I'd like to touch on how our financial profile is distinctive as well as our strategy around capital allocation. Starting with the fourth quarter. Revenue was $35.2 million, down 5% year-over-year, but up 2% sequentially from Q3. The unusually heavy TRCV attrition we experienced in Q3 2024 continued to recognize revenue through Q4 of 2024, creating a difficult comparison for Q4 2025. Even against that headwind, our sequential revenue growth highlights the improving momentum in the business. TRCV reached $144.1 million, which was up 8% year-over-year and 2% sequentially. This was our fifth consecutive quarter of sequential TRCV growth and reflects the strong execution across our sales and customer success teams.

Fourth quarter adjusted EBITDA was $8.7 million. As mentioned on the Q3 call, our Q4 operating expenses came in higher than the prior year due to the timing of our annual customer conference, the Human Understanding Beyond or HUB Conference, which we held in Q4 this year versus Q3 last year. Adjusted net income for the quarter was $3.4 million and adjusted EPS was $0.16 per share. Additionally, during the quarter, we paid a quarterly dividend of $0.12 per share, consistent with our commitment to returning capital to shareholders.

Now turning to the full year picture. Revenue for 2025 was $137.4 million, down 4% from 2024. This decline was expected given our TRCV performance in 2024, where we saw elevated attrition in the second half of that year. However, with the TRCV growth of 8% in 2025, we are confident that revenue growth will follow in 2026. Adjusted EBITDA for full year 2025 was $40.2 million, representing a 29% margin. We held our margin profile even as revenue declined, underscoring our ability to fund the growth initiatives Trent outlined, while maintaining disciplined cost management. In other words, we're demonstrating that investing for growth and delivering strong profitability can go hand in hand.

Adjusted net income for 2025 was $20.7 million and adjusted EPS was $0.93 per share. These results showcase our compelling financial profile. This profile includes our highly predictable revenue streams. With 99% of our revenue being recurring, we have a very good revenue visibility. And our TRCV metric has proven to be a very strong leading indicator of how our top line will perform. This predictability is rare and valuable. Our financial profile also boasts strong profit margins. Our adjusted EBITDA margin is currently near 30%, and we see upside as revenue recovers.

As we execute on those 6 growth catalysts, we will ensure NRC is positioned well for margin expansion. Our free cash flow durability also adds to our unique financial profile. Our business converts earnings into free cash flow efficiently and our strong free cash flow margins allow us to fund growth investments and return capital to shareholders, which leads me to the final aspect of our financial profile, our thoughtful, impactful and diversified approach to capital allocation. We have a clear flexible framework for deploying capital. First, we're investing meaningfully in our business and technology, hiring talented people, innovating new capabilities and exploring Blue Water opportunities that can accelerate our growth and improve our competitive position.

Second, we're returning capital to our shareholders. We do so directly through our dividend, which reflects our confidence in this financial profile as well as returning capital indirectly through the opportunistic share repurchases that offset dilution and enhance per share returns.

Third, we are maintaining the flexibility to pursue highly strategic, accretive acquisitions that expand our addressable market, reinforce our competitive position and create incremental value by leveraging NRC's operating model to drive cost efficiencies, sales expansion and integration synergies. As we move into 2026, we look forward to driving growth, profitability and long-term value creation for our shareholders. The foundation is solid. The trajectory is clear, and I'm excited about the opportunity ahead.

With that, I'll turn it back to Trent.

Thank you, Shane. I want to emphasize one key point. NRC Health is uniquely positioned to thrive in the evolving health care landscape. Our mission to turn Human Understanding into meaningful, measurable action resonates deeply with health care leaders, navigating unprecedented complexity. The momentum we've built in customer growth, retention, team building and financial execution gives me tremendous confidence in our ability to create lasting value. I'm grateful to our incredible team of associates, our loyal customers and our supportive investors for the trust you place in NRC Health.

As a reminder, if you have questions or want to engage further, please contact us at the e-mail address [email protected].

That concludes today's call. Thank you for your participation, and have a wonderful rest of your day.

Good afternoon. Thank you for attending the NRC Health Third Quarter 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] And I would now like to pass the conference over to your host for today's call. You may proceed.

Thank you, operator. Welcome to NRC Health's Earnings Conference Call for the third quarter ended September 30, 2025. I want to first let you know that we posted our earnings press release to the Investor Relations section on our website. On the call today, we have NRC Health's CEO, Trent Green; and our new CFO, Shane Harrison.

Before getting started, I'd like to emphasize that this call will include statements related to the expected future results of our company, which are therefore forward-looking statements. Our actual results may differ materially from our expectations due to a number of risks and uncertainties, including those described in our earnings release and other SEC filings.

Today's remarks will include references to non-GAAP financial measures. Additional information, including definitions and reconciliations between non-GAAP financial information and GAAP financial information is provided in the corresponding earnings press release, which is posted on NRC Health's Investor Relations website. A replay of this call will be posted to the same website. With that, let me turn this call over to our CEO, Trent Green.

Good afternoon, everyone, and thank you for joining us for NRC Health's Third Quarter 2025 Earnings Call. Today, I'll discuss our Q3 financial results, share a few reflections from my first 120 days as CEO and outline our near-term operational and strategic priorities. Starting with the quarter's results. I'm very pleased with how our teams executed. Revenue reached nearly $35 million and adjusted EBITDA was $11 million, reflecting 11% year-over-year growth.

Total recurring contract value, or TRCV, a valuable leading indicator of our recurring revenue over the next 12 months rose 8% year-over-year to $142 million, our strongest growth since 2020. This performance reflects strong sales momentum across both existing and new customers. In Q3, we secured multiple deals, including an over $1 million TRCV expansion with a top 50 health system. Two additional nearly $1 million cross-sells with top 100 health systems and a new logo win exceeding $500,000 in TRCV with an East Coast health system that acquired multiple NRC Health products.

Each of these wins came from competitive takeaways. We were selected for the breadth of our products, the value of our unique data insights and enablement tools and the differentiating service and client success we deliver day in and day out. Just as important, our customer retention continues to strengthen. Over the past year, our customer strategy team has reduced TRCV losses and downsells by nearly 50%.

Additionally, we're seeing great success in expanding with our existing customers. Cross-sell and upsells during the quarter, a few of which I just mentioned, resulted in the best quarterly customer expansion activity we've seen in 6 years. Together, these trends drove our net retention rate to its highest level since 2020.

Now stepping back to reflect on my first few months as CEO, after spending time with our associates, customers, prospects and investors, I'm even more confident in NRC Health's opportunities for growth and value creation. Our market opportunity is substantial. The U.S. health care landscape is evolving, defined by shifting consumer expectations, regulatory complexity, workforce challenges and financial pressure.

To succeed, health care organizations must connect deeply with the people they serve while adapting to these systemic forces. That's exactly where NRC Health is uniquely positioned. Our mission to turn human understanding into meaningful, measurable action aligns directly with what health care providers need most. This leads me to my next reflection. The competitive differentiation NRC Health has built through our deep subject matter expertise and our exclusive focus on the health care sector.

A great example of this differentiation was our annual Human Understanding Beyond Customer Conference, which we refer to as Hub, held two weeks ago in Orlando. This event brought together hundreds of leaders from health systems of all sizes and provided a powerful forum for customers to share success stories, collaborate with one another and with our NRC Health associates and learn about our evolving product road map.

The energy and engagement at Hub showcased the tangible impact our products and teams are having, driving measurable improvements in patient, employee and provider experiences and health system outcomes. Through Hub and my customer visits over the past few months, I've heard firsthand that our value proposition has never been more relevant. It's built on three core pillars of differentiation.

First, insights. Our platform uniquely provides continuous data on what individuals expect, experience and value throughout their health care journey, alongside broader market intelligence on what communities, regulators and peers are saying across the health care ecosystem. Our second pillar is engagement. Our clients view NRC Health as a trusted partner, not just a data provider. They value our decades of experience and our ability to translate insights into action through deep relationships across all levels of their organizations, from boards to frontline staff.

We treat all of our interactions as a true partnership and as a privilege that we strive to earn every day. Our third is enablement. We empower our clients to act, providing the tools, workflows and best practices that convert insights into measurable improvement in health system governance, brand performance and patient and employee experience. These three pillars are the foundation of our strategy and innovation road map. We'll continue to build upon each, advancing our products, deepening our customer partnerships and driving outcomes that improve health care for all.

Now looking ahead, our operational priorities are clear and focused. First, delivering excellence in client partnership. We'll continue strengthening our customer success capabilities to engage more deeply across our clients' organizations. Second, evolving our go-to-market model, better aligning sales, marketing and customer success to accelerate cross-sell momentum and drive more new logo wins.

Third, modernizing our technology platform. We're building on a scalable modern tech stack to support seamless integration and new AI-driven innovations. These initiatives will help us fortify our foundation, amplify our impact and position NRC Health for sustained growth, strong margins and lasting value creation. Finally, as I mentioned in our Q2 earnings call, I've been engaged in building up our management team. I'm pleased to welcome Shane Harrison as our new CFO.

Shane joined NRC last month, bringing more than 25 years of experience in finance, strategy, M&A and investor relations at leading SaaS and technology companies, including most recently at PowerSchool. I'm excited about the leadership team we're building and confident in the opportunities ahead.

And with that, I'll turn it over to Shane to share what drew him to NRC and to walk through the details of our financial performance.

Thank you, Trent, and good afternoon, everybody. I'm thrilled to be here today and to be part of NRC Health. I've always been drawn to mission-driven companies that are trying to change the way people live and how they can thrive. NRC's focus on delivering meaningful insights across the full spectrum of health care stakeholders and using those insights to drive better outcomes is something that resonates with me.

On top of this mission, NRC's subscription business model, commitment to data-centric solutions and history of innovation were a great fit for me. Now on to the details of our third quarter 2025 results. For the quarter, we reached $34.6 million of revenue, growing 2% sequentially. Our TRCV finished at $141.7 million, which was 8% higher than the third quarter of 2024 and has now grown sequentially for four consecutive quarters.

Driving this growth is the strong sales momentum in both new logos and cross-sell, upsell as well as improved gross dollar retention. Adjusted EBITDA for the quarter was $10.9 million, up 11% year-over-year and representing a 31% margin, which expanded over 4 percentage points from Q3 of 2024.

Operating expenses were lower due primarily to reduced compensation expense and the timing of marketing expenses, part of which will return in Q4 of this year. Third quarter 2025 adjusted net income was $0.23 per fully diluted share. During the quarter, we repurchased 618,000 of our shares for $9.3 million, which reduced our weighted average fully diluted share count for the third quarter to 22.1 million shares. Compared to the prior year, our weighted average diluted share count is 1.6 million shares lower, which is a reduction of 7% year-over-year.

During the quarter, we paid our normal dividend of $0.12 per share, and we announced yesterday a 33% increase to our quarterly dividend to $0.16 per share, which will be payable in January. With our strong balance sheet and consistent cash flow, we remain committed to a disciplined approach to capital allocation, balancing dividends and opportunistic share repurchases with strategic investments, both organic and inorganic that deliver compelling ROI.

With that, I'll turn it back over to Trent.

Thank you, Shane. We're encouraged by the continued momentum across our business. Health systems are increasingly turning to NRC Health as their trusted partner for insights and enablement solutions, helping them better understand their patients, their employees and their communities. Our authenticity and health care-specific focus continue to set us apart.

Every product we deliver is exclusively built for health care, empowering our customers to improve outcomes for all their stakeholders while driving greater efficiency and effectiveness across their organizations. We remain confident in our direction and excited about the opportunity ahead to extend NRC Health's leadership in transforming human understanding into meaningful, measurable action.

I want to thank our associates for their commitment, our customers for their trust and our shareholders for their support. We're excited about the opportunities ahead and look forward to sharing more about our progress in the quarters to come. As a reminder, if you have any questions or want to engage further, please contact us at the e-mail address [email protected].

This concludes today's call. You may now disconnect.