NRC HEALTH
For the period ended Mar 31, 2025. Filed May 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
NRC$25.86+1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001437749-24-034119
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001437749-25-015674
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 53 previous paragraphs and 44 current paragraphs.
16 unchanged; 21 reworded; 6 added; 11 removed; 5 previous and 1 current paragraphs rearranged.
Tables are not compared: 3 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
On February 26, 2025, our Board of Directors appointed Trent Green as our Chief Executive Officer and to serve as a director, both effective June 1, 2025. Mr. Green brings more than 25 years of healthcare leadership experience, most recently serving as Chief Executive Officer of Amazon One Medical and previously as Chief Operating Officer of Legacy Health. Upon the effectiveness of Mr. Green’s appointment as Chief Executive Officer, Mr. Hays will transition to the role of Chairman.
Current report
Selling, general and administrative expenses. Selling, general and administrative expenses decreased in the 2025 period compared to the 2024 period primarily due to decreased marketing expenses of $688,000 and reduced legal and accounting fees of $259,000. While we continue to invest in product development and sales, our goal is to drive efficiencies and savings in overall costs to offset such investments. Selling, general and administrative expenses are expected to increase due to increased compensation expense related to certain executives and our new CEO. We expect a $3.6 million (based on the price of our common stock at April 25, 2025) charge during the second quarter of 2025 for Mr. Green's signing bonus and quarterly non-cash charges of approximately $447,000 (based on the price of our common stock on April 25, 2025) for Mr. Green's equity grant beginning in June 2025 and continuing through the third anniversary of the grant. Additionally, in light of Mr. Green’s appointment, two other executives were awarded similar compensation arrangements, which will result in a charge of $1.7 million in April 2025 for cash bonuses and quarterly non-cash charges of $207,000 beginning in April 2025 and continuing through March 2028. In consideration for the foregoing compensation, the long-term cash incentive plan was terminated and the unvested performance awards were forfeited for these two executives.
Current report
Capital Expenditures
Current report
Interest accrues and is payable monthly at a floating rate equal to the one-month Term SOFR plus a percentage per annum determined by our cash flow leverage ratio, ranging from 2.25% to 2.75% (6.67% at March 31, 2025).
Current report
The outstanding balance on the Delayed Draw Term Loan was $62.2 million at March 31, 2025. Principal amounts outstanding are due and payable monthly during the term of the Delayed Draw Term Loan, in equal monthly installments to amortize the aggregate outstanding principal balance by (i) 5% during each of the first three years and (ii) 7.5% during each of the fourth and fifth years following the date of such loan. All outstanding principal and interest on the Delayed Draw Term Loan are due and payable in full at the maturity date, February 6, 2030. We had the availability to borrow an additional $47.6 million on the Delayed Draw Term Loan at March 31, 2025.
Current report
During the three months ended March 31, 2025, we repurchased 307,709 shares of our common stock under the 2022 Program for an aggregate of $5.0 million.
Removed paragraphs (11)
Previous report
Selling, general and administrative expenses. Selling, general and administrative expenses decreased in the 2024 period compared to the 2023 period primarily due to decreased marketing expenses of $890,000, less web hosting and other software services of $204,000, decreased legal fees of $142,000 and less consulting fees of $141,000 partially offset by increased salary and benefit costs of $669,000 from investments in strategic leadership, product development and sales teams. We expect these investment levels to continue with the goal of driving efficiencies and savings in overall costs.
Previous report
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Previous report
Selling, general and administrative expenses. Selling, general and administrative expenses decreased in the 2024 period compared to the 2023 period primarily due to decreased marketing expenses of $1.4 million, less web hosting and other software services of $217,000, lower bad debt expense of $172,000 and decreased training costs of $171,000. We increased investments in strategic leadership, product development and sales during the year. We expect these investment levels to continue with the goal of driving efficiencies and savings in overall costs.
Previous report
Total other income (expense). Total other expense increased in the 2024 period compared to the 2023 period primarily due to lower interest income of $676,000 from decreased money market funds investments and higher interest expense of $1.3 million mainly from borrowings on our Line of Credit and Delayed Draw Term Loan, as well as the increased interest rate on our Term Loan. Other expense is expected to increase in future periods due to additional borrowings on our Delayed Draw Term Loan and the August 2024 amendment to our Credit Agreement, which extended the maturity of our debt and revised the interest rate on our Term Note to SOFR plus 2.35%.
Previous report
Our Credit Facilities were amended on August 5, 2024, which (i) extended the maturity of the Line of Credit, (ii) extended the commitment date until which FNB will make loans available under the Delayed Draw Term Loan, (iii) revised the payments on the current balances of the Term Loan and Delayed Draw Term Loan and any future balances on the Delayed Draw Term Loan to monthly installments amortized over ten-year periods, (iv) revised the interest rate on the Term Loan from a 5% fixed rate to a floating rate based on the 30-day Secured Overnight Financing Rate (“SOFR”), (v) extended the use of the Delayed Draw Term Loan to include dividends, stock repurchases, acquisitions, and capital expenditures and (vi) increased the allowable building renovations excluded from the fixed charge coverage ratio covenant.
Previous report
Borrowings under the Term Loan, Delayed Draw Term Loan and Line of Credit, if any, accrue interest at a floating rate equal to the SOFR plus 235 basis points (7.55% at September 30, 2024), which is payable monthly.
Previous report
The outstanding balance on the Term Loan was $14.5 million at September 30, 2024. Principal payments were due in monthly installments of $92,800 through May 2027 and a balloon payment for the remaining balance of $11.6 million is due May 28, 2027.
Previous report
The outstanding balance on the Delayed Draw Term Loan was $34.2 million at September 30, 2024. Principal payments are due on the Delayed Draw Term Loan in monthly installments of $220,882 through May 2027 and a balloon payment for the remaining balance of $27.1 million is due in May 28, 2027. We had the availability to borrow an additional $39 million on the Delayed Draw Term Loan at September 30, 2024.
Previous report
The Credit Facilities are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on and perfected security interest in substantially all of our and our guarantors’ present and future assets (including, without limitation, fee-owned real property, and limited, in the case of the equity interests of foreign subsidiaries, to 65% of the outstanding equity interests of such subsidiaries).
Previous report
In June 2024, a final deemed dividend was paid from our Canadian subsidiary and the deemed repatriation tax payable imposed by the U.S. Tax Cuts and Jobs Act of 2017 of $8,000 was paid.
Previous report
During the three months ended September 30, 2024, we repurchased 395,217 shares of our common stock under the 2022 Program. As of September 30, 2024, the remaining number of shares of common stock that could be purchased under the 2022 Program was 700,633 shares.
Reworded paragraphs (21)
Previous wording
The following tables set forth, for the periods indicated, selected financial information derived from our condensed consolidated financial statements and the percentage change in such items versus the prior comparable period, as well as other key financial metrics. The discussion that follows the information should be read in conjunction with our condensed consolidated financial statements.
Current wording
The following table sets forth, for the periods indicated, selected financial information derived from our condensed consolidated financial statements and the percentage change in such items versus the prior comparable period, as well as other key financial metrics. The discussion that follows the information should be read in conjunction with our condensed consolidated financial statements.
Previous wording
*Revenue.*Revenue in the 2024 period decreased compared to the 2023 period by $2.1 million. This was mainly from decreased US recurring revenue in our existing client base. Of this decrease, 26% was from our non-core solutions.
Current wording
*Revenue.*Revenue in the 2025 period decreased compared to the 2024 period by $1.8 million. This was mainly from decreased recurring revenue of $2.1 million in our existing client base, partially offset by an increase in revenue from new clients of $353,000. We view total Recurring Contract Value, or TRCV, a measure of revenue under all renewable contracts for their respective annual renewal periods, as a leading indicator of revenue expectations. TRCV declined for several quarters prior to the fourth quarter of 2024, when it increased slightly and increased further sequentially in the first quarter 2025. We believe the expansion of our product and services portfolio during 2024, along with a broader sales effort, led to improved sales and retention in the fourth quarter compared with the prior several quarters. Despite this sequential quarterly improvement, TRCV was lower for the first quarter of 2025 compared to the first quarter of 2024. There is a lag between changes in TRCV (next twelve months) and revenue (trailing twelve months). Generally, if we are able to sustain growth in TRCV, we would expect revenue growth to follow within the next few quarters (and vice versa). However, intervening events may affect this general expectation.
Previous wording
Direct expenses. Variable expenses increased $494,000 in the 2024 period compared to the 2023 period primarily from higher conference expenses partially offset by decreased data collection expenses. Variable expenses as a percentage of revenue were 16% and 15% in the 2024 and 2023 periods, respectively. Fixed expenses decreased $133,000 primarily due to decreased salary and benefit costs from workforce changes and automation partially offset by increased contracted services to support investments in our Human Understanding® solutions. We have increased investments and will continue to invest in providing innovative AI solutions to our clients.
Current wording
Direct expenses. Variable expenses increased $267,000 in the 2025 period compared to the 2024 period primarily due to higher conference costs due to more conferences in the 2025 period than the 2024 period, partially offset by lower data collection expenses. Variable expenses as a percentage of revenue were 17% and 15% in the 2025 and 2024 periods, respectively. Fixed expenses decreased $1.1 million primarily due to decreased salary and benefit costs from workforce reduction and automation implemented in the fourth quarter of 2024 partially offset by increased contracted services to support investments in our Human Understanding solutions.* *We expect to continue to invest in providing innovative solutions to our clients, which could cause direct expenses to fluctuate as a percentage of revenue.
Previous wording
Depreciation and amortization. Depreciation and amortization expenses decreased $9,000 due to less building, furniture and computer equipment depreciation partially offset by increased software investment amortization and intangible amortization from the Nobl acquisition.
Current wording
Depreciation and amortization. Depreciation, amortization and impairment expenses increased in 2025 compared to the 2024 period due to increased software investment amortization and intangible amortization from the Nobl acquisition partially offset by less building, furniture and computer equipment depreciation. We expect our depreciation and amortization to increase slightly given continued software and intangible amortization, as well as depreciation on the building renovations when completed in 2025.
Previous wording
Operating income and margin. Operating income and margin decreased in the 2024 period compared to the 2023 period primarily due to the decline in revenue.
Current wording
Operating income and margin. Operating income decreased in the 2025 period compared to the 2024 period primarily due to the decline in revenue, but operating margin increased in the 2025 period compared to the 2024 period due to the decrease in marketing expenses, legal and accounting, and salary and benefit costs partially offsetting the reduction in revenue. In the near term, we expect operating income and margin to increase due to revenue and cost initiatives, excluding the impact of the executive compensation charges described above.
Previous wording
Total other income (expense). Total other expense increased in the 2024 period compared to the 2023 period primarily due to lower interest income of $222,000 from decreased money market funds investments and higher interest expense of $546,000 mainly from borrowings on our Line of Credit and Delayed Draw Term Loan, as well as the increased interest rate on our Term Loan. Other expense is expected to increase in future periods due to additional borrowings on our Delayed Draw Term Loan and the August 2024 amendment to our Credit Agreement, which extended the maturity of our debt and revised the interest rate on our Term Note to SOFR plus 2.35%.
Current wording
Total other expense. Total other expense increased in the 2025 period compared to the 2024 period primarily due to higher interest expense of $294,000 mainly from higher borrowings outstanding on our Delayed Draw Term Loan, partially offset by lower average borrowings and interest rates on the Revolving Loan. Other expense is expected to increase in future periods due to additional borrowings on our Delayed Draw Term Loan and Revolving Loan.
Previous wording
*Provision for income taxes and effective tax rate.*Provision for income taxes decreased in the 2024 period compared to the 2023 period primarily due to decreased taxable income. The effective tax rate increased mainly due to decreased tax benefits of $55,000 from the exercise of share-based compensation awards and higher state income taxes of approximately $241,000 which fluctuate based on various apportionment factors and rates for the states in which we operate.
Current wording
Provision for income taxes and effective tax rate. The effective tax rate increased in the 2025 period compared to the 2024 period primarily due to decreased tax benefits from share-based compensation awards, an increase in the effective rate related to state income taxes which fluctuates based on various apportionment factors and rates for the states we operate in. The provision for income taxes increased due to the increase in the effective tax rate partially offset by the decrease in income before income taxes.
Previous wording
Recurring Contract Value. Recurring contract value declined in 2024 compared to 2023 primarily due to the lack of growth in new contracts to replace losses. Our retention rate remained fairly consistent in comparison to prior years. Our recurring contract value metric represents the total revenue projected under all renewable contracts for their respective next annual renewal periods, assuming no upsells, downsells, price increases, or cancellations, measured as of the most recent quarter end.
Current wording
Recurring Contract Value. Recurring contract value at March 31, 2025 was lower compared to March 31, 2024 primarily due to the lack of growth in new contracts to replace losses. Our retention rate remained fairly consistent from prior years. Recurring contract value increased at March 31, 2025 compared to December 31, 2024 as year-to-date new sales surpassed year-to-date losses. Our recurring contract value metric represents the total revenue projected under all renewable contracts for their respective next annual renewal periods, assuming no upsells, downsells, price increases, or cancellations, measured as of the most recent quarter end.
Previous wording
As of September 30, 2024, our principal sources of liquidity included $3.5 million of cash and cash equivalents, up to $25 million of unused borrowings under our Line of Credit and an additional $39 million on our Delayed Draw Term Loan. The Delayed Draw Term Loan can only be used to fund dividends, capital expenditures, permitted future business acquisitions or repurchasing our common stock.
Current wording
As of March 31, 2025, our principal sources of liquidity included $2.5 million of cash and cash equivalents, up to $26.5 million of unused borrowings under our Revolving Loan and an additional $47.6 million on our Delayed Draw Term Loan.
Previous wording
Our cash flows from operating activities consist of net income adjusted for non-cash items including depreciation and amortization, deferred income taxes, share-based compensation and related taxes, reserve for uncertain tax positions, change in fair value of contingent consideration and the effect of working capital changes. Cash provided by operating activities increased primarily due to working capital changes, mainly consisting of changes in trade accounts receivable due to timing of invoicing and payments, accrued expenses, wages and bonuses mainly due to the timing of payments and changes in prepaid expenses and other current assets primarily due to the timing of our annual business insurance and other service agreements partially offset by changes in income taxes receivable and payable due to the timing of payments. Cash provided by operating activities was also partially offset by decreased net income net of non-cash items.
Current wording
Our cash flows from operating activities consist of net income adjusted for non-cash items including depreciation and amortization, deferred income taxes, share-based compensation, reserve for uncertain tax positions, loss on extinguishment of debt, change in fair value of contingent consideration, and the effect of working capital changes. Cash provided by operating activities decreased primarily due to working capital changes, mainly consisting of changes in trade accounts receivable primarily due to timing of initial billings and collections for new and renewal contracts, prepaid expenses and other current assets primarily due to the timing of our annual business insurance and other service agreements, accrued expenses, wages and bonuses, deferred revenue and income taxes payable and receivable mainly due to the timing of payments, partially offset by changes in accounts payable. Cash provided by operating activities was also partially offset by an increase in net income net of non-cash items.
Previous wording
We had a working capital deficit of $23.6 million and $11.8 million on September 30, 2024 and December 31, 2023, respectively. The change was primarily due to decreases in cash and cash equivalents and trade accounts receivable and increases in the borrowings outstanding on our Line of Credit and Delayed Draw Term Loan, accrued expenses, accounts payable, accrued wages and bonuses, deferred revenue and contingent consideration due to the acquisition. These were partially offset by increases in prepaid expenses primarily due to the timing of our annual business insurance payment and other service agreements, increases in income taxes receivable due to timing of payments and decreased current portion of notes payable due to the amendment of our credit agreement . Cash and cash equivalents decreased mainly due to the repurchase of shares of our common stock for treasury and cash paid to fund the Nobl acquisition, which was also funded by borrowings on our Line of Credit and Delayed Draw Term Loan. Accrued expenses, accounts payable and accrued wages and bonuses increased primarily due to the timing of payments. Trade accounts receivable decreased due to timing of billing and collections, as well as decreases in our overall recurring contract value. Our working capital is significantly impacted by our large deferred revenue balances which will vary based on the timing and frequency of billings on annual agreements. Notwithstanding our working capital deficit on September 30, 2024, we believe that our existing sources of liquidity, including cash and cash equivalents, borrowing availability, and operating cash flows will be sufficient to meet our projected capital and debt maturity needs for the foreseeable future.
Current wording
We had a working capital deficit of $17.4 million and $16.3 million on March 31, 2025 and December 31, 2024, respectively. The change was primarily due to decreases in cash and cash equivalents and increases in the borrowings outstanding on our Revolving Loan and accounts payable. These were partially offset by increases in accounts receivable and prepaid expenses primarily due to the timing of our annual business insurance payment and other service agreements and decreases in the current portion of our long-term debt, accrued expenses and deferred revenue. Cash and cash equivalents decreased mainly due to the repurchase of shares of our common stock for treasury. We also borrowed on our Revolving Loan to fund the share repurchases. Accounts payable and accrued expenses vary due to the timing of payments. Trade accounts receivable increased due to timing of billing and collections. Our working capital is significantly impacted by our large deferred revenue balances which will vary based on the timing and frequency of billings on annual agreements. Notwithstanding our working capital deficit on March 31, 2025, we believe that our existing sources of liquidity, including cash and cash equivalents, borrowing availability, and operating cash flows will be sufficient to meet our projected capital and debt maturity needs for the foreseeable future.
Previous wording
Cash used in investing activities primarily consisted of payments for the acquisition of Nobl Health and purchases of property and equipment including computer software and hardware, building improvements, and furniture and equipment.
Current wording
Cash used in investing activities primarily consisted of purchases of property and equipment including computer software and hardware, building improvements, and furniture and equipment.
Previous wording
Cash used in financing activities consisted of payments for borrowings under the Term Loan, Delayed Draw Term Loan, Line of Credit and finance lease obligations. We also used cash to repurchase shares of our common stock for treasury, to pay dividends on common stock and for payment of payroll tax withholdings on options exercised. This was partially offset by cash provided from borrowings on the Line of Credit and Delayed Draw Down Term loan.
Current wording
Cash used in financing activities consisted of payments for debt issuance costs and payments on our notes payable related to our extinguishment of debt and new credit agreement, payments on our Revolving Loan and finance lease obligations. We also used cash to pay contingent consideration related to our 2024 acquisition of Nobl Health, repurchase shares of our common stock for treasury, to pay dividends on common stock and for payment of payroll tax withholdings on options exercised. This was partially offset by cash provided from borrowings on our notes payable under our new credit agreement and Revolving Loan and proceeds from the exercise of stock options.
Previous wording
Cash dividends of $8.6 million were paid in the nine months ended September 30, 2024. Dividends of $2.8 million were declared in the three months ended September 30, 2024 and paid in October 2024. The dividends were paid from cash on hand and borrowings on our Line of Credit. Our board of directors considers whether to declare a dividend and the amount of any dividends declared on a quarterly basis.
Current wording
Cash dividends of $2.8 million were paid in the three months ended March 31, 2025. Dividends of $2.7 million were declared in the three months ended March 31, 2025 and paid in April 2025. The dividends were paid from cash on hand and borrowings on our Revolving Loan. Our Board of Directors considers whether to declare a dividend and the amount of any dividends declared on a quarterly basis.
Previous wording
We paid cash of $11.0 million for capital expenditures in the nine months ended September 30, 2024. These expenditures consisted mainly of computer software development for our Human Understanding® solutions and building renovations to our headquarters. We estimate future costs related to our headquarters building renovations to be $2.5 million in 2024 and $4.7 million in 2025, which we expect to fund through operating cash flows and borrowings on the Line of Credit or Delayed Draw Term Loan.
Current wording
We paid cash of $3.0 million for capital expenditures in the three months ended March 31, 2025. These expenditures consisted mainly of computer software development for our Human Understanding solutions and building renovations to our headquarters. We estimate future costs related to our headquarters building renovations to be $3.7 million in 2025, which we expect to fund through operating cash flows and borrowings on the Revolving Loan and Delayed Draw Term Loan.
Previous wording
Our amended and restated credit agreement (the “Credit Agreement”) with First National Bank of Omaha (“FNB”) includes (i) a $30.0 million revolving credit facility (the “Line of Credit”), (ii) a $23.4 million term loan (the “Term Loan”) and (iii) a $75.0 million delayed draw-down term facility (the “Delayed Draw Term Loan” and, together with the Line of Credit and the Term Loan, the “Credit Facilities”). We may use the Delayed Draw Term Loan through May 2026 to fund dividends, any permitted future business acquisitions, capital expenditures or repurchases of our common stock. The Line of Credit is available to fund ongoing working capital needs and for other general corporate purposes.
Current wording
Our Credit Agreement includes (i) a $30.0 million revolving credit facility (the “Revolving Loan”) and (ii) a $110.0 million delayed draw-down term facility (“the “Delayed Draw Term Loan” and, together with the Revolving Loan, the “Credit Facilities”). The Delayed Draw Term Loan includes an accordion feature that, so long as no event of default exists or would exist after giving effect to such increase, allows us to request an increase in the Delayed Draw Term Loan of up to the lesser of (x) $25.0 million and (y) our EBITDA as of the preceding four fiscal quarters, exercisable in increments of $10.0 million (or the remaining available amount of the accordion, if less). We may use the Delayed Draw Term Loan to fund permitted future business acquisitions, repurchases of our common stock, capital expenditures or payment of dividends and the Revolving Loan to fund ongoing working capital needs and for other general corporate purposes.
Previous wording
Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in May 2027. As of September 30, 2024, we had $5.0 million of borrowings outstanding and the availability to borrow $25.0 million on the Line of Credit. The weighted average borrowings on the Line of Credit for the three-month periods ended September 30, 2024 and 2023 were $8.0 million and $543,000, respectively. The weighted average borrowings on the Line of Credit for the nine-month periods ended September 30, 2024 and 2023 were $9.0 million and $183,000, respectively. The weighted average interest rate on borrowings on the Line of Credit during the three-month periods ended September 30, 2024 and 2023 were 7.65% and 7.68%, respectively. The weighted average interest on borrowings on the Line of Credit during the nine-month periods ended September 30, 2024 was 7.67% and 7.68%, respectively.
Current wording
Principal amounts outstanding under the Revolving Loan are due and payable in full at maturity at February 6, 2028. As of March 31, 2025, we had $3.5 million of borrowings outstanding and the availability to borrow $26.5 million on the Revolving Loan. Our weighted average short-term borrowings for the three month periods ended March 31, 2025 and 2024 were $2.0 million and $9.1 million, respectively. The weighted average interest rate on short-term borrowings during the three month periods ended March 31, 2025 and 2024 was 6.67% and 7.69%, respectively.
Previous wording
We are obligated to pay ongoing unused commitment fees quarterly in arrears at a rate of 0.20% per annum based on the actual daily unused portions of the Line of Credit and the Delayed Draw Term Loan facility.
Current wording
We are obligated to pay ongoing unused commitment fees quarterly in arrears at a percentage per annum determined by our cash flow leverage ratio, ranging from 0.15% to 0.30%, based on the actual daily unused portions of the Revolving Loan and the Delayed Draw Term Loan, respectively.
Previous wording
The Credit Agreement is collateralized by substantially all of our assets, subject to permitted liens and other agreed exceptions, and contains customary representations, warranties, affirmative and negative covenants (including financial covenants) and events of default. The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of our common stock and acquisitions, subject in each case to certain exceptions. Pursuant to the Credit Agreement, we are required to maintain a minimum fixed charge coverage ratio of 1.10x for all testing periods throughout the term(s) of the Credit Facilities, which calculation excludes, unless our liquidity falls below a specified threshold, (i) any cash dividend in a fiscal quarter that, together with all other cash dividends paid or declared during such fiscal quarter, exceeds $5.5 million in total cash dividends paid or declared, (ii) the portion of the purchase price for any permitted share repurchase of our shares paid with cash on hand, (iii) the portion of any acquisition consideration for a permitted acquisition paid with cash on hand, and (iv) up to $27.5 million of costs associated with our building renovation from or after January 1, 2023. We are also required to maintain a cash flow leverage ratio of 3.00x or less for all testing periods throughout the term(s) of the Credit Facilities. All obligations under the Credit Facilities are to be guaranteed by each of our direct and indirect wholly owned domestic subsidiaries, if any, and, to the extent required by the Credit Agreement, direct and indirect wholly owned foreign subsidiaries. As of September 30, 2024, we were in compliance with our financial covenants.
Current wording
The Credit Agreement is collateralized by substantially all of our assets, subject to permitted liens and other agreed exceptions, and contains customary representations, warranties, affirmative and negative covenants (including financial covenants) and events of default. The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of our common stock and acquisitions, subject in each case to certain exceptions. Pursuant to the Credit Agreement, we are required to maintain a minimum fixed charge coverage ratio of 1.10x for all testing periods throughout the terms of the Credit Facilities, which calculation excludes, unless our liquidity falls below a specified threshold, (i) any cash dividend in a fiscal quarter that, together with all other cash dividends paid or declared during such fiscal quarter, exceeds $5.5 million in total cash dividends paid or declared, (ii) the portion of the purchase price for any permitted share repurchase of our shares paid with cash on hand, (iii) the portion of any acquisition consideration for a permitted acquisition paid with cash on hand, and (iv) up to $32.5 million of costs associated with our building renovation from or after January 1, 2023. We are also required to maintain a cash flow leverage ratio of 3.50x or less for all testing periods throughout the term of the Credit Facilities. As of March 31, 2025, we were in compliance with our financial covenants.
Previous wording
We have lease arrangements for certain computer, office, printing and inserting equipment as well as office and data center space. As of September 30, 2024, we had fixed lease payments of $674,000 and $10,000 for operating and finance leases, respectively payable within 12 months.
Current wording
We have lease arrangements for certain computer, office, printing and inserting equipment as well as office and data center space. As of March 31, 2025, we had fixed lease payments of $574,000 and $10,000 for operating and finance leases, respectively payable within 12 months.
Previous wording
In May 2022, our Board of Directors authorized the repurchase of 2,500,000 shares of common stock (the “2022 Program”). Under the 2022 Program we are authorized to repurchase from time-to-time shares of our outstanding common stock on the open market or in privately negotiated transactions. The timing and amount of stock repurchases will depend on a variety of factors, including market conditions as well as corporate and regulatory considerations. The 2022 Program may be suspended, modified, or discontinued at any time and we have no obligation to repurchase any amount of common stock in connection with the 2022 Program. The 2022 Program has no set expiration date.
Current wording
In April 2025 our Board of Directors approved a new stock repurchase authorization of up to 1.0 million shares of our common stock (the “2025 Program”). We are authorized to repurchase shares of our outstanding common stock from time-to-time on the open market or in privately negotiated transactions, provided that the maximum dollar amount repurchased shall not exceed $20 million without further consent. The timing and amount of stock repurchases will depend on a variety of factors, including market conditions as well as corporate and regulatory considerations. The stock repurchase authorization may be suspended, modified, or discontinued at any time and we have no obligation to repurchase any amount of our common stock in connection with the repurchase authorization. The repurchase authorization has no set expiration date. The new authorization follows our recent repurchase of all shares remaining under the 2022 Program.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
In May 2022, our Board of Directors authorized the repurchase of 2.5 million shares of common stock (the “2022 Program”). Under the 2022 Program we are authorized to repurchase from time-to-time shares of our outstanding common stock on the open market or in privately negotiated transactions. There are no remaining shares that can be purchased under the 2022 Program at March 31, 2025.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Direct expenses. Variable expenses increased $452,000 in the 2024 period compared to the 2023 period primarily from higher conference expenses partially offset by decreased data collection expenses. Variable expenses as a percentage of revenue were 18% and 16% in the 2024 and 2023 periods, respectively. Fixed expenses increased $220,000 primarily due to higher contracted services to support investments in our Human Understanding solutions partially offset by decreased salary and benefit costs from workforce changes and automation and state tax incentive adjustments.* *We have increased investments and will continue to invest in providing innovative AI solutions to our clients.
Previous report — wording carried elsewhere
Provision for income taxes and effective tax rate. Provision for income taxes decreased in the 2024 period compared to the 2023 period primarily due to decreased taxable income. The effective tax rate remained consistent between periods.
Previous report — wording carried elsewhere
*Revenue.*Revenue in the 2024 period decreased compared to the 2023 period by $4.4 million. This was mainly from decreased US recurring revenue in our existing client base. Of this decrease, 28% was from our non-core solutions.
Previous report — wording carried elsewhere
Depreciation and amortization. Depreciation and amortization expenses increased $37,000 in the 2024 period compared to the 2023 period primarily due to increased software investment amortization and intangible amortization from the Nobl acquisition.
Previous report — wording carried elsewhere
Operating income and margin. Operating income and operating margin decreased in the 2024 period compared to the 2023 period primarily due to the decline in revenue exceeding the decline in operating expenses.