NATIONAL RESEARCH CORP

Previous wording

Our purpose is to humanize healthcare and support organizations in their understanding of each unique individual. Our commitment to Human Understanding® helps leading healthcare systems get to know each person they serve not as point-in-time insights, but as an ongoing relationship. Our end-to-end solutions enable our clients to understand what matters most to each person they serve – before, during, after, and beyond clinical encounters – to gain a longitudinal understanding of how life and health intersect, with the goal of developing lasting, trusting relationships. Our ability to measure what matters most and systematically capture, analyze, and deliver insights based on self-reported information from patients, families, and consumers is critical in today’s healthcare market. We believe access to and analysis of our extensive consumer-driven information is increasingly valuable as healthcare providers need to better understand and engage the people they serve to create long-term relationships and build loyalty.

Current wording

We have led the charge to humanize healthcare and support organizations in their understanding of each unique individual. Our commitment to Human Understanding® helps leading healthcare systems get to know each person they serve not as point-in-time insights, but as an ongoing relationship. Guided by its uniquely empathic heritage, our patient-focused approach, unmatched market research, and emphasis on consumer preferences are transforming the healthcare experience, leading to strong outcomes for patients and health systems.

Previous wording

Our portfolio of subscription-based solutions provides actionable information and analysis to healthcare organizations across a range of mission-critical, constituent-related elements, including patient experience, service recovery, care transitions, employee engagement, reputation management, and brand loyalty. We partner with clients across the continuum of healthcare services and believe this cross-continuum positioning is a unique and an increasingly important capability as evolving payment models drive healthcare providers and payers towards a more collaborative and integrated service model.

Current wording

Our portfolio of Artificial Intelligence (“AI”)-enabled subscription-based solutions provides actionable information and analysis to healthcare organizations across a range of mission-critical, constituent-related elements, including patient experience, service recovery, care transitions, employee engagement, reputation management, rounding, and brand loyalty. We partner and engage deeply with clients across the continuum of healthcare services and believe this cross-continuum positioning is a unique and an increasingly important capability as evolving payment models drive healthcare providers and payers towards a more collaborative and integrated service model. We believe access to and analysis of our extensive consumer-driven information is increasingly valuable as healthcare providers need to better understand and engage the people they serve to create long-term relationships and build loyalty.

Previous wording

*Revenue.*Revenue in the 2025 period decreased compared to the 2024 period by $1.0 million. This was mainly from decreased recurring revenue of $1.3 million in our existing client base and $134,000 in non-recurring revenue, partially offset by an increase in revenue from new clients of $419,000. 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, then it increased slightly in the fourth quarter of 2024 and increased further sequentially in each of the first and second quarters of 2025 (see further discussion in the six months ended comparison). 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 second quarter of 2025 compared to the second 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.

Current wording

*Revenue.*Revenue in the 2025 period decreased compared to the 2024 period by $1.2 million. This was mainly from decreased recurring revenue of $1.6 million in our existing client base, partially offset by an increase in revenue from new clients of $0.3 million. We view Total Recurring Contract Value, or TRCV, a measure of revenue under all renewable contracts for their respective renewal periods, as a leading indicator of revenue expectations. Our TRCV metric represents the total revenue projected under all renewable contracts for their respective next renewal periods, assuming no upsells, downsells, price increases, or cancellations, measured as of the most recent quarter end. TRCV increased slightly in the fourth quarter of 2024 and increased further sequentially in each of the first, second, and third quarters of 2025. 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, such as upsells, downsells, price increases, or cancellations, may affect this general expectation.

Previous wording

Direct expenses. Variable expenses decreased $244,000 in the 2025 period compared to the 2024 period primarily due to lower data collection expenses partially offset by higher conference costs due to more conferences in the 2025 period than the 2024 period. Variable expenses as a percentage of revenue were 15% in each, the 2025 and 2024 periods. Fixed expenses decreased $204,000 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.

Current wording

Direct expenses. Variable expenses decreased $1.8 million in the 2025 period compared to the 2024 period primarily due to lower conference costs due to the timing of our annual Human Understanding Beyond (HUB) event which occurred in the fourth quarter of 2025 compared to the third quarter of 2024. Variable expenses as a percentage of revenue were 14% and 19% 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.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased in the 2025 period compared to the 2024 period primarily due to increased salary and benefits of $7.6 million and legal and accounting expenses of $167,000. The increase in salaries and benefits is primarily due to implementing new compensation arrangements for our new CEO and existing executive leaders. As a result of the new arrangements, we recognized $6.6 million in cash bonuses and increased non-cash share-based compensation expense of $364,000. These increases were partially offset by decreased marketing expenses of $1.1 million and reduced recruiting expenses of $325,000. 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 in the third quarter of 2025 compared to the similar period of 2024 due to increased compensation expense related to certain executives and our new CEO. Non-cash charges related to executive equity awards granted in the second quarter of 2025 will approximate $770,000 quarterly through March 2028 and $375,000 in the second quarter of 2028. In consideration for the foregoing compensation, the prior long-term cash incentive plan was terminated and the unvested performance awards were forfeited for two executives.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased in the 2025 period compared to the 2024 period primarily due to increased salary and benefits of $1.1 million and legal and accounting expenses of $0.3 million. The increase in salaries and benefits is primarily due to implementing new compensation arrangements in 2025 for our CEO and executive leaders. These increases were partially offset by decreased marketing expenses of $0.5 million.

Previous wording

Depreciation and amortization. Depreciation and amortization expenses increased in 2025 compared to the 2024 period due to increased depreciation on our building and related furnishings due to our building renovations being completed during 2025 and increased intangible amortization from the Nobl acquisition. These increases were partially offset by decreased software amortization. We expect our depreciation and amortization to increase given continued software and intangible amortization, as well as depreciation on the building renovations and related furnishings completed during 2025.

Current wording

Depreciation and amortization. Depreciation and amortization expenses increased in 2025 compared to the 2024 period due to increased depreciation on our building and related furnishings due to our building renovations being completed during 2025.

Previous wording

Total other expense. Total other expense increased in the 2025 period compared to the 2024 period primarily due to higher interest expense of $477,000 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.

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 $0.8 million mainly from higher borrowings outstanding on our Delayed Draw Term Loan, partially offset by lower average borrowings and interest rates on the Revolving Loan.

Previous 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 deductible limitations on executive compensation related to cash bonuses in the second quarter of 2025. The provision for income taxes decreased due to the increase in the effective tax rate partially offset by the decrease in income before income taxes.

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 deductible limitations on executive compensation related to cash bonuses in the second quarter of 2025. 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

*Revenue.*Revenue in the 2025 period decreased compared to the 2024 period by $2.7 million. This was mainly from decreased recurring revenue of $3.4 million in our existing client base and $91,000 in non-recurring revenue, partially offset by an increase in revenue from new clients of $771,000.

Current wording

*Revenue.*Revenue in the 2025 period decreased compared to the 2024 period by $4.0 million. This was mainly from decreased recurring revenue of $5.0 million in our existing client base, partially offset by an increase in revenue from new clients of $1.1 million.

Previous wording

Direct expenses. Variable expenses increased $23,000 in the 2025 period compared to the 2024 period primarily from lower data collection expenses, partially offset by increased conference expenses due to more conferences in the 2025 period. Variable expenses as a percentage of revenue were 16% and 15% in the 2025 and 2024 periods, respectively. Fixed expenses decreased $1.3 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 and computer equipment and supplies 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.

Current wording

Direct expenses. Variable expenses decreased $1.8 million in the 2025 period compared to the 2024 period primarily from lower conference expenses due to the timing of our annual Human Understanding Beyond (HUB) event which occurred in the fourth quarter of 2025 compared to the third quarter of 2024 and lower data collection expenses. Variable expenses as a percentage of revenue were 15% and 16% in the 2025 and 2024 periods, respectively. Fixed expenses decreased $2.3 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 computer equipment and supplies to support product development.* *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 increased in 2025 compared to the 2024 period due to increased depreciation on our building and furnishings due to our building renovations completed during 2025 and increased intangible amortization from the Nobl acquisition. We expect our depreciation and amortization to increase given continued software and intangible amortization, as well as depreciation on the building renovations and related furnishings completed during 2025.

Current wording

Depreciation and amortization. Depreciation and amortization expenses increased in 2025 compared to the 2024 period due to increased depreciation on our building and furnishings due to our building renovations completed during 2025 and increased intangible amortization from the Nobl acquisition.

Previous wording

Total other expense. Total other expense increased in the 2025 period compared to the 2024 period primarily due to higher interest expense of $772,000 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.

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 $1.5 million mainly from higher borrowings outstanding on our Delayed Draw Term Loan, partially offset by lower average borrowings and interest rates on the Revolving Loan.

Previous 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 deductible limitations on executive compensation related to cash bonuses in the second quarter of 2025. The provision for income taxes decreased due to the increase in the effective tax rate partially offset by the decrease in income before income taxes.

Current wording

*Provision for income taxes and effective tax rate.*The provision for income taxes decreased due to the decrease in income before income taxes, partially offset by the increase in the effective tax rate. The effective tax rate increased in the 2025 period compared to the 2024 period primarily due to deductible limitations on executive compensation related to cash bonuses in the second quarter of 2025.

Previous wording

As of June 30, 2025, our principal sources of liquidity included $5.3 million of cash and cash equivalents, up to $30 million of unused borrowings under our Revolving Loan and an additional $27.6 million on our Delayed Draw Term Loan.

Current wording

As of September 30, 2025, our principal sources of liquidity included $2.2 million of cash and cash equivalents, up to $30 million of unused borrowings under our Revolving Loan, and an additional $27.6 million on our Delayed Draw Term Loan, excluding the accordion feature.

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, 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 the decrease in net income (loss), net of non-cash items, and working capital changes. Working capital changes mainly consisted 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, and income taxes payable and receivable mainly due to the timing of payments.

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 for the nine months ended September 30, 2025 decreased compared to the nine months ended September 30, 2024, primarily due to the decrease in net income, and working capital changes that reduced cash flow. Working capital changes mainly consisted of changes in trade accounts receivable and prepaid expenses and other current assets primarily due to the timing of our annual business insurance and other service agreements. These reductions in cash flow were partially offset by changes in accrued expenses, wages and bonuses, deferred revenue and income taxes payable and receivable mainly due to the timing of payments. Accounts receivable and deferred revenue vary based on the timing and frequency of billings and payments on customer agreements.

Previous wording

We had a working capital deficit of $10.6 million and $16.3 million on June 30, 2025 and December 31, 2024, respectively. The change was primarily due to increases in cash and cash equivalents, increases in accounts receivable, prepaid expenses primarily due to the timing of our annual business insurance payment and other service agreements, and other current assets and decreases in the current portion of our long-term debt, deferred revenue income taxes payable. These increases were partially offset by increases in accrued wages and bonuses and accrued expenses. Cash and cash equivalents increased mainly due to borrowings on our Delayed Draw Term Loan for the repurchase of shares of our common stock for treasury and building renovations. 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 June 30, 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.

Current wording

We had a working capital deficit of $18.2 million and $16.3 million on September 30, 2025 and December 31, 2024, respectively. The change was primarily due to decreases in cash and cash equivalents and increases in accrued wages and bonuses, deferred revenue, and income taxes payable. These changes 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 and accrued expenses. Cash and cash equivalents decreased mainly due to the repurchase of shares of our common stock for treasury, payments for building renovations and dividend paid on common stock. 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 September 30, 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 dividends of $5.5 million were paid in the six months ended June 30, 2025. Dividends of $2.8 million were declared in the three months ended June 30, 2025 and paid in July 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.

Current wording

Cash dividends of $8.3 million were paid in the nine months ended September 30, 2025. Dividends of $2.7 million were declared in the three months ended September 30, 2025, and paid in October 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 $6.0 million for capital expenditures in the six months ended June 30, 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 $2.7 million in 2025, which we expect to fund through operating cash flows and borrowings on the Revolving Loan and Delayed Draw Term Loan.

Current wording

We paid cash of $9.6 million for capital expenditures in the nine months ended September 30, 2025. These expenditures consisted mainly of building renovations to our headquarters and computer software development for our product portfolio solutions.

Previous wording

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 June 30, 2025).

Current wording

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% (6.63% at September 30, 2025).

Previous wording

The outstanding balance on the Delayed Draw Term Loan was $82.4 million at June 30, 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 $27.6 million on the Delayed Draw Term Loan at June 30, 2025.

Current wording

The outstanding balance on the Delayed Draw Term Loan was $80.4 million at September 30, 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 $27.6 million on the Delayed Draw Term Loan at September 30, 2025, excluding the accordion feature.

Previous wording

Principal amounts outstanding under the Revolving Loan are due and payable in full at maturity at February 6, 2028. As of June 30, 2025, we had no borrowings outstanding and the availability to borrow $30.0 million on the Revolving Loan. Our weighted average short-term borrowings for the three-month periods ended June 30, 2025 and 2024 were $8.2 million and $10.0 million, respectively. Our weighted average short-term borrowings for the six-month periods ended June 30, 2025 and 2024 were $5.1 million and $9.5 million, respectively. The weighted average interest rate on short-term borrowings during the three-month periods ended June 30, 2025 and 2024 was 6.67% and 7.67%, respectively. The weighted average interest rate on short-term borrowings during the six-month periods ended June 30, 2025 and 2024 was 6.67% 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 September 30, 2025, we had no borrowings outstanding and the availability to borrow $30.0 million on the Revolving Loan. Our weighted average short-term borrowings for the three month periods ended September 30, 2025 and 2024, were $1.1 million and $8.0 million, respectively. Our weighted average short-term borrowings for the nine month periods ended September 30, 2025 and 2024, were $3.8 million and $9.0 million, respectively. The weighted average interest rate on short-term borrowings during the three month periods ended September 30, 2025 and 2024, was 6.68% and 7.65%, respectively. The weighted average interest rate on short-term borrowings during the nine month periods ended September 30, 2025 and 2024, was 6.67% and 7.67%, respectively.

Previous wording

We have lease arrangements for certain computer, office, printing and inserting equipment as well as office and data center space. As of June 30, 2025, we had fixed lease payments of $534,000 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 space. As of September 30, 2025, we had fixed lease payments of $514,000 and $10,000 for operating and finance leases, respectively payable within 12 months.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses. We are evaluating the full effects of the legislation on our estimated annual effective tax rate and cash tax position, but we do not expect that the legislation will have a material impact on our financial statements. As the legislation was signed into law after the close of our second quarter, the impacts are not included in our operating results for the six months ended June 30, 2025.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses. We are evaluating the full effects of the legislation on our estimated annual effective tax rate and cash tax position, but we do not expect that the legislation will have a material impact on our financial statements.

Previous wording

During the three months ended June 30, 2025, we repurchased 381,736 shares of our common stock under the 2025 Program for an aggregate of $5.8 million.

Current wording

During the three months ended September 30, 2025, we repurchased 618,264 shares of our common stock under the 2025 Program for an aggregate of $9.3 million. As of September 30, 2025, there are no remaining shares authorized for repurchase under the 2025 Program.