NATIONAL RESEARCH CORP

To the Shareholders and the Board of Directors

National Research Corporation:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of National Research Corporation and subsidiary (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established inInternal Control–* Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established inInternal Control–* Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over new and modified subscription-based service agreement terms

As discussed in Notes 1 and 3 to the consolidated financial statements, revenue consists of service arrangement contracts with customers that can include more than one separately identifiable performance obligation. The Company’s revenue for the year ended December 31, 2025 included $125.6 million for subscription-based service agreements, a portion of which was revenue from new and modified subscription-based service agreements, that was recognized ratably over the subscription period and which agreements are renewable at the option of the customer. Subscription*-*based service agreements represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period.

We identified the evaluation of the sufficiency of audit evidence over the key terms within new and modified subscription-based service agreements as a critical audit matter. Specifically, the nature and extent of procedures performed over the key terms within the new and modified subscription-based service agreements required subjective auditor judgment as recognition of revenue by the Company is dependent on the accuracy of the key terms within the related information technology (IT) application used to calculate revenue. The key terms within the new and modified subscription-based service agreements included the description of service, transaction price, renewal price and contract term.

The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the accuracy of key terms within the IT application, including the identification of key terms. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s subscription-based service revenue process, including controls related to the key terms within the new and modified subscription-based service agreements. We also tested certain internal controls over the accurate input of the underlying key terms of the subscription-based service agreement into the related IT application. We performed a software-assisted data analysis to test relationships among certain revenue transactions. In addition, for a sample of revenue transactions, we compared the key terms used in the revenue calculation to the underlying contract with the customer. We evaluated the sufficiency of audit evidence obtained over the key terms within new and modified subscription-based service agreements by assessing the results of procedures performed, including the appropriateness of the nature and extent of audit effort.

/s/KPMG LLP

We have served as the Company’s auditor since 1997.

Omaha, Nebraska

March 5, 2026

(In thousands, except share amounts)

(In thousands, except share amounts)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’** EQUITY**

(In thousands except share and per share amounts)

(In thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

(In thousands)

In 2025, material state jurisdictions that are equal to or greater than 5% of the total cash paid for taxes (in thousands) included California.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of Business and Basis of Presentation

National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “us” or similar terms), has led the charge to humanize healthcare and support organizations in their understanding of each unique individual. NRC Health’s commitment to Human Understanding® helps leading healthcare systems improve their operations through understanding each person they serve not as point-in-time insights, but as an ongoing relationship. Guided by its uniquely empathic heritage, NRC Health’s patient-focused approach, unmatched market and consumer preferences research, and action-oriented enablement solutions are transforming the healthcare experience, leading to strong outcomes for patients and entire healthcare systems.

Our portfolio of subscription-based solutions provides actionable information, analysis, and workflow enablement tools 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 with customers across the continuum of healthcare services and believe this cross-continuum positioning is a unique and an increasingly important capability as the evolving healthcare landscape drives its constituents towards a more collaborative and integrated service model. We believe access to, analysis of, and acting on our extensive individual-driven information is increasingly valuable as healthcare providers need to better understand and engage the people they serve to create long-term relationships, build loyalty, and improve processes.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiary, National Research Corporation Canada, until it was dissolved in August 2024. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

We derive a majority of our revenues from our annually renewable subscription-based service agreements with our customers, which include performance measurement and improvement services, healthcare analytics, and governance education services. See Note 3 for further information about our contracts with customers. We account for revenue using the following steps:

Our revenue arrangements with a customer may include combinations of more than one service offering which may be executed at the same time, or within close proximity of one another. We combine contracts with the same customer into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated together. For contracts that contain more than one separately identifiable performance obligation, the total transaction price is allocated to the identified performance obligations based upon the relative stand-alone selling prices of the performance obligations. The stand-alone selling prices are based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost-plus margin or residual approach. We estimate the amount of total contract consideration we expect to receive for variable arrangements based on the most likely amount we expect to earn from the arrangement based on the expected quantities of services we expect to provide and the contractual pricing based on those quantities. We only include some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. We consider the sensitivity of the estimate, our relationship and experience with the customer and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement. Our revenue arrangements do not contain any significant financing element due to the contract terms and the timing between when consideration is received and when the service is provided.

Our arrangements with customers consist principally of four different types of arrangements: 1) subscription-based service agreements; 2) one-time specified services performed at a single point in time; 3) fixed, non-subscription service agreements; and 4) unit-priced service agreements.

Subscription-based services–* *Services that are provided under subscription-based service agreements are a single promise to stand ready to provide reporting, tools, and services throughout the subscription period as requested by the customer. These agreements are renewable at the option of the customer at the completion of the initial contract term, which spans anywhere from one to three years or more in length. These agreements represent a series of distinct monthly services that are substantially the same, with the same pattern of transfer to the customer as the customer receives and consumes the benefits throughout the contract period. Accordingly, subscription services are recognized ratably over the subscription period. Subscription services are typically billed either annually or quarterly in advance but may also be billed on a monthly basis.

One-time services–* *These agreements typically require us to perform a specific one-time service in a particular month. We are entitled to a fixed payment upon completion of the service. Under these arrangements, we recognize revenue at the point in time we complete the service and it is accepted by the customer.

Fixed, non-subscription services–* *These arrangements typically require us to perform an unspecified amount of services for a fixed price during a fixed period of time. Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs. In determining cost estimates, management uses historical and forecasted cost information, which is based on estimated volumes, external and internal costs, and other factors necessary in estimating the total costs over the term of the contract. Changes in estimates are accounted for using a cumulative catch-up adjustment which could impact the amount and timing of revenue for any period.

Unit-price services–* *These arrangements typically require us to perform certain services on a periodic basis as requested by the customer for a per-unit amount which is typically billed in the month following the performance of the service. Revenue under these arrangements is recognized over the time the services are performed at the per-unit amount.

Revenue is presented net of any sales tax charged to our customers that we are required to remit to taxing authorities. We recognize contract assets or unbilled receivables related to revenue recognized for services completed but not invoiced to the customers. Unbilled receivables are classified as receivables when we have an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice customers in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.

Deferred Contract Costs

Deferred contract costs, net is stated at gross deferred costs less accumulated amortization. We defer commissions and incentives, including payroll taxes, if they are incremental and recoverable costs of obtaining a customer contract with terms more than one year, including possible renewals. Deferred contract costs are amortized over the estimated term of the contract, including renewals, which generally ranges from three tofive years. The contract term was estimated by considering factors such as historical customer attrition rates and product life. The amortization period is adjusted for significant changes in the estimated remaining term of a contract. An impairment of deferred contract costs is recognized when the unamortized balance of deferred contract costs exceeds the remaining amount of consideration we expect to receive net of the expected future costs directly related to providing those services. We have elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of one year or less. We deferred incremental costs of obtaining a contract of $2.1 million, $1.2 million, and $395,000 in the years ended December 31, 2025, 2024, and 2023, respectively. Deferred contract costs, net of accumulated amortization, was $2.5 million and $1.6 million at December 31, 2025, and 2024, respectively. Total amortization by expense classification for the years ended December 31, 2025, 2024, and 2023, was as follows:

Impairment of deferred contract costs due to lost customers were $7,000, $57,000, and $41,000 for the years ended December 31, 2025, 2024, and 2023, respectively.

Trade Accounts Receivable

The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable, determined based on our historical write-off experience, current economic conditions, and reasonable and supportable forecasts about the future. We review the allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The following table provides the activity in the allowance for doubtful accounts for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Property and Equipment

Property and equipment is stated at cost. Major expenditures to purchase property or to substantially increase useful lives of property are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.

We capitalize certain costs incurred in connection with obtaining or developing internal-use software, including payroll and payroll-related costs for employees who are directly associated with the internal-use software projects and external direct costs of materials and services. Capitalization of such costs ceases when the project is substantially complete and ready for its intended purpose. Costs incurred during the preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed as incurred. We capitalized approximately $2.8 million, $3.7 million, and $4.3 million of costs incurred for the development of internal-use software for the years ended December 31, 2025, 2024, and 2023, respectively.

When a purchased software license is included in a cloud computing arrangement and we have the legal right, ability, and feasibility to download the software, it is accounted for as software, included in property and equipment, and amortized. If a purchased software license is not included or we do not have the ability or feasibility to download the software included in a cloud computing arrangement, it is accounted for as a service contract, which is expensed to direct expenses or selling, general and administrative expenses during the service period.

We provide for depreciation and amortization of property and equipment using annual rates which are sufficient to amortize the cost of depreciable assets over their estimated useful lives. We use the straight-line method of depreciation and amortization over estimated useful lives oftwo toten years for furniture and equipment, three tofive years for computer equipment, one tofive years for capitalized internal-use software, andseven toforty years for our office building and related improvements. Purchased software licenses are amortized over the term of the license.

Impairment of Long-Lived Assets and Amortizing Intangible Assets

Long-lived assets, including property and equipment and purchased intangible assets subject to depreciation or amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. No significant impairments were recorded during the years ended December 31, 2025, 2024, or 2023.

Among others, management believes the following circumstances are important indicators of potential impairment of such assets and as a result may trigger an impairment review:

Goodwill and Intangible Assets

Intangible assets include customer relationships, trade names, technology, and goodwill. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. We review intangible assets with indefinite lives for impairment annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

When performing the impairment assessment, we will first assess qualitative factors to determine whether it is necessary to determine the fair value of the intangible assets with indefinite lives. If we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value of an indefinite-lived intangible is less than its carrying amount, we calculate the fair value using a market or income approach. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, then the intangible asset is written-down to its fair value. We didnot recognize any impairments related to indefinite-lived intangibles during 2025, 2024, or 2023.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. All of our goodwill is allocated to our reporting unit, which is the same as our operating segment. Goodwill is reviewed for impairment at least annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

We review goodwill for impairment by first assessing qualitative factors to determine whether any impairment may exist. If we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative analysis will be performed, and the fair value of the reporting unit is compared with its carrying value (including goodwill). If the carrying value of the reporting unit exceeds the fair value, then goodwill is written down by this difference. We performed a qualitative analysis as of October 1, 2025, and determined the fair value of our reporting unit likely exceeded the carrying value. No impairments were recorded during the years ended December 31, 2025, 2024, or 2023.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under that method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances, if any, are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. We use the deferral method of accounting for our investment tax credits related to state tax incentives. During the years ended December 31, 2025, 2024, and 2023, we recorded income tax benefits relating to these tax credits of $0, $10,000, and $2,000, respectively. Interest and penalties related to income taxes are included in income taxes in the Consolidated Statements of Income.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Share-Based Compensation

All of our existing stock option awards and non-vested stock awards have been determined to be equity-classified awards. The compensation expense on share-based payments is recognized based on the grant-date fair value of those awards. We recognize the excess tax benefits and tax deficiencies in the income statement when options are exercised. Amounts recognized in the financial statements with respect to these plans are as follows (in thousands):

We refer to our restricted stock awards as “non-vested” stock in these consolidated financial statements. References to non-vested stock include incentive stock awards that vested on the grant date but which remain subject to transfer restrictions and a repurchase right for de minimis consideration in favor of the Company.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents were $4.1 million and $4.2 million as of December 31, 2025, and 2024, respectively, consisting primarily of money market accounts. At certain times, cash equivalent balances may exceed federally insured limits.

Leases

We determine whether a lease is included in an agreement at inception. We recognize a lease liability and a right-of-use (“ROU”) asset on the balance sheet for our operating leases under which we are lessee. Operating lease ROU assets are included in operating lease right-of-use assets in our consolidated balance sheet. Finance lease assets are included in property and equipment. Operating and finance lease liabilities are included in other current liabilities and other long-term liabilities. Certain lease arrangements may include options to extend or terminate the lease. We include these provisions in the ROU asset and lease liabilities only when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term and is included in direct expenses and selling, general and administrative expenses. Our lease agreements do not contain any residual value guarantees.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments during the lease term. ROU assets and lease liabilities are recorded at lease commencement based on the estimated present value of lease payments. Because the rate of interest implicit in each lease is not readily determinable, we use our estimated incremental collateralized borrowing rate at lease commencement, to calculate the present value of lease payments. When determining the appropriate incremental borrowing rate, we consider our available credit facilities, recently issued debt, and public interest rate information.

Due to remote working arrangements, we reassessed our office needs and subleased our Seattle location under an agreement considered to be an operating lease beginning in May 2021. We had not been legally released from our primary obligations under the original lease and therefore we continued to account for the original lease separately until the lease terminated on August 30, 2025. Rent income from the sublessee is included in the statement of operations on a straight-line basis as an offset to rent expense associated with the original operating lease included in other expenses. There wereno ROU asset impairment charges in 2025, 2024, or 2023.

Fair Value Measurements

Our valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The inputs are then classified into the following hierarchy: (1) Level 1 Inputs—quoted prices in active markets for identical assets and liabilities; (2) Level 2 Inputs—observable market-based inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; (3) Level 3 Inputs—unobservable inputs.

The following details our financial assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy (in thousands):

There were no transfers between levels during the years ended December 31, 2025, and 2024.

Our contingent consideration liability relates to potential future payments to the former owners of Nobl Health (“Nobl”), which was acquired in the third quarter of 2024. The potential future payments are contingent upon the achievement of certain customer contract metrics. Contingent consideration was recognized at the date of acquisition and is remeasured at each reporting date at its estimated fair value. The remeasured fair value could differ materially from the initial estimates and uses significant unobservable inputs classified as Level 3 inputs. We measured fair value using a discounted cash flow model based on the present value of expected future payments, which considers the likelihood of meeting contract thresholds at future payment dates. Significant increases or decreases to any of the inputs in isolation could result in a significantly higher or lower liability. The change to the contingent consideration liability from the acquisition date, at each reporting date and the final amount paid, which is capped at $1.0 million, were recognized in earnings. The measurement period for the contingent consideration arrangement was completed as of December 31, 2025, and the remaining liability was settled in January 2026.

The following summarizes the changes in the fair value of our contingent consideration liability for the years ended December 31, 2025, and 2024 (in thousands):

Our long-term debt described in Note 7 is recorded at amortized cost. The fair value of our variable rate long-term debt is believed to approximate the carrying value because we believe the current rate reasonably estimates the current market rate for our debt. The fair value of the debt is considered a Level 1 estimate within the fair value hierarchy.

The carrying amounts of accounts receivable, accounts payable, and accrued expenses approximate their fair value. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes ROU assets, property and equipment, goodwill, intangibles, and cost method investments, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of December 31, 2025, and 2024, there wasno indication of impairment related to these assets.

Equity Investments

We make equity investments to promote business and strategic objectives. For investments that do not have a readily determinable fair value, we apply the measurement alternative and carry such investments at cost, less impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Equity investments are periodically analyzed to determine whether indicators of impairment exist and are written down to fair value if an impairment is determined to be other than temporary. These investments are included in non-current assets on the consolidated balance sheets.

Commitments and Contingencies

From time to time, we are involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable. Legal fees, net of estimated insurance recoveries, are expensed as incurred. We do not believe the final disposition of claims at December 31, 2025 will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We are self-insured for group medical and dental insurance. We carry excess loss coverage in the amount of $150,000 per covered person per year for group medical insurance. We do not self-insure for any other types of losses and therefore do not carry any additional excess loss insurance. In addition, we had aggregate claims loss coverage with a minimum aggregate deductible of $5.8 million, $5.5 million, and $5.4 million, in 2025, 2024, and 2023, respectively. We record a reserve for our group medical and dental insurance for all unresolved claims and for an estimate of incurred but not reported (“IBNR”) claims. On a quarterly basis, we adjust our accrual based on a review of our claims experience and a third-party actuarial IBNR analysis. As of December 31, 2025, and 2024, our accrual related to self-insurance was $466,000 and $364,000, respectively.

Earnings Per Share

Basic net income per share was computed using the weighted-average number of common shares outstanding during the period.

Diluted net income per share was computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

We had 405,790,401,489, and 263,909 options of common stock for the years ended December 31, 2025, 2024, and 2023, respectively, which have been excluded from the diluted net income per share computation because their inclusion would be anti-dilutive. Performance-based stock option awards have not been included in the computation since the conditions have not been met.

The following table reconciles income and shares used to compute basic and diluted earnings per share:

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU enhances the transparency and decision usefulness of income tax disclosures by requiring, among other things, additional disaggregation of the effective tax rate reconciliation, income taxes paid by jurisdiction, and pretax income and income tax expense between domestic and foreign sources. The ASU also removes certain existing income tax disclosure requirements.

The Company adopted ASU 2023-09 prospectively for annual periods beginning January 1, 2025. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows, but resulted in expanded income tax disclosures in the accompanying consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

The Company monitors recently issued accounting pronouncements to assess their potential impact on its consolidated financial statements and related disclosures. The following Accounting Standards Updates (“ASUs”) have been issued but not yet adopted. The Company has evaluated or is currently evaluating each standard to determine the impact of adoption.

In February 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which provides improvements to the disclosure requirements for expenses. The update primarily impacts disclosures by requiring entities to provide additional detail about the natural classification of significant expenses that are included in relevant income statement line items. ASU 2024-03 is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim periods thereafter. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position or results of operations, but it will result in expanded expense disclosures beginning with the Company’s annual financial statements for the year ending December 31, 2027.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which provides targeted improvements to the accounting for internal-use software. The update replaces the current project stage model with a principles-based framework and requires capitalization to begin when management authorizes and commits funding, and project completion is probable. ASU 2025-06 is effective for the Company for annual reporting periods beginning after December 15, 2027, including interim periods within those years. The Company is currently evaluating the effect of adopting this standard, and the impact is not yet known or reasonably estimable. The Company will determine the transition method for adoption and does not plan to adopt before the effective date.

In July 2024, we entered into a Stock Purchase Agreement to acquire all outstanding equity interests of Nobl, a provider of innovative rounding solutions for healthcare organizations, for cash delivered at closing of $6.0 million, subject to certain adjustments. We acquired Nobl to expand our portfolio of solutions and further support our experience customers in gathering real time employee and patient feedback. The Stock Purchase Agreement included a contingent consideration arrangement based on the achievement of specified customer contract metrics. See Note 1 for additional information regarding the contingent consideration arrangement, including fair value measurement and changes in the liability.

Total consideration paid for Nobl is as follows (in thousands):

The acquisition was accounted for as a business combination, using the acquisition method of accounting, which requires the allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair values assigned to the intangible assets acquired were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques. The following table summarizes the final amounts of fair value of assets acquired and liabilities assumed at the acquisition date.

The results of operations of Nobl are included in the Company’s consolidated financial statements from the acquisition date. Acquisition-related costs of $119,000 were included in selling, general and administrative expenses for the year ended December 31, 2024. The acquisition did not have a material impact on the Company’s consolidated financial statements for the years ended December 31, 2024, and 2025.

The following table disaggregates revenue for the years ended December 31, 2025, 2024, and 2023 based on timing of revenue recognition (in thousands):

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers (in thousands):

Significant changes in contract assets and contract liabilities during the years ended December 31, 2025, and 2024, are as follows (in thousands):

We have elected to apply the practical expedient to not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Total remaining contract revenue for contracts with original duration of greater than one year expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2025, approximated $168.2 million, of which $73.5 million, $59.1 million, $27.5 million, $6.0 million, and $2.1 million is expected to be recognized during 2026,2027,2028,2029, and 2030, respectively.

At December 31, 2025, and 2024, property and equipment consisted of the following (in thousands):

Work in progress included in furniture and equipment and computer software at December 31, 2025, was $74,000 and $445,000, respectively. Work in progress included in computer equipment, computer software, and building improvements at December 31, 2024, was $191,000, $759,000, and $25.6 million, respectively. Depreciation and amortization expense related to property and equipment, including assets under capital lease, for the years ended December 31, 2025, 2024, and 2023, was $7.2 million, $5.8 million, and $5.8 million, respectively. We capitalize interest expense on major construction and development projects while in progress. Interest capitalized for 2025, 2024, and 2023 was $551,000, $1.0 million, and $566,000, respectively. There wereno significant impairments of property and equipment during 2025, 2024, and 2023.

The carrying amount of goodwill totaled $66.2 million at December 31, 2025, and 2024. There were no changes in goodwill during the year ending December 2025.

The following are changes to the carrying amount of goodwill during the year ending December 31, 2024 (in thousands):

Intangible assets consisted of the following at December 31, 2025:

Intangible assets consisted of the following at December 31, 2024:

Aggregate amortization expense for customer related intangibles, trade names, and technology for the years ended December 31, 2025, 2024, and 2023 was $389,000, $264,000, and $140,000, respectively. Estimated future amortization expense is $249,000, $249,000, $249,000, $166,000, and $83,000 for 2026, 2027, 2028, 2029, and 2030, respectively.

For the years ended December 31, 2025, 2024, and 2023, income before provision for income taxes consisted of the following (in thousands):

Income tax expense (benefit) consisted of the following components (in thousands):

The effective tax rate of our provision (benefit) for income taxes differs from the federal statutory rate as follows (in thousands, except percentages):

(1) In 2025, state taxes in California, Massachusetts, Minnesota, New Jersey, and Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

Deferred tax assets and liabilities at December 31, 2025, and 2024, were comprised of the following (in thousands):

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider projected future taxable income, carry-back opportunities, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, we believe it is more likely than not that we will realize the benefits of these deductible differences.

We capitalize costs of research or experimental expenditures including software development for tax purposes and amortize over a period offive years (attributable to domestic research) or 15 years (attributable to foreign research), beginning with the midpoint of the taxable year in which the expenses are paid or incurred. We capitalized costs of $2.0 million, $5.5 million, and $7.8 million for tax purposes in 2025, 2024 and 2023, respectively, resulting in deferred tax assets of $1.5 million, and $3.9 million at December 31, 2025, and 2024, respectively.

We had an unrecognized tax benefit of $2.2 million at December 31, 2025, and 2024, excluding interest of $136,000 and $68,000 at December 31, 2025, and 2024, respectively. Of this amount, $1.9 million at December 31, 2025, and 2024, represents the net unrecognized tax benefit that, if recognized, would favorably impact the effective income tax rate. The change in the unrecognized tax benefits for 2025 and 2024 was as follows (in thousands):

The Inflation Reduction Act of 2022 (“IRA”) includes an excise tax on certain stock repurchases. As a result, the Company capitalized excise taxes of $195,000 and $331,000 as part of the cost of treasury stock during 2025 and 2024, respectively. The IRA did not have any other material impact on the Company’s consolidated financial statements.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and, until our Canadian subsidiary was dissolved, in Canada federal and provincial jurisdictions. Tax years 2021 and forward remain subject to U.S. federal examination. Tax years 2018 and forward remain subject to state examination. Tax years 2020 and forward remain subject to Canadian federal and provincial examination.

Our long-term debt consists of the following (in thousands):

In February 2025, we entered into a new credit agreement (the “Credit Agreement”) with a group of lenders that amended and restated the terms of our then existing credit agreement, as amended. We recognized a loss on extinguishment of debt of $67,000 for the unamortized debt issuance costs related to our previous long-term debt, which is included in other expense. The 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.

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% (6.22% at December 31, 2025).

Principal amounts outstanding under the Delayed Draw Term Loan 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 December 31, 2025, excluding the accordion feature.

Principal amounts outstanding under the Revolving Loan are due and payable in full at maturity at February 6, 2028. As of December 31, 2025, we hadno borrowings outstanding and the availability to borrow $30.0 million on the Revolving Loan. Our weighted average short-term borrowings for the years ended December 31, 2025, and 2024, were $3.1 million and $8.5 million, respectively. The weighted average interest rate on short-term borrowings during the years ended December 31, 2025, and 2024, was 6.63% and 7.52%, respectively.

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.

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 1.10 x and a cash flow leverage ratio of 3.50 x or less for all testing periods throughout the term of the Credit Facilities.

Scheduled maturities of notes payable at December 31, 2025, are as follows (in thousands):

We measure and recognize compensation expense for all share-based payments based on the grant-date fair value of those awards. All of our existing stock option awards and unvested stock awards have been determined to be equity-classified awards. We account for forfeitures as they occur.

Our 2004 Non-Employee Director Stock Plan, as amended (the “2004 Director Plan”), was a nonqualified plan that provided for the granting of options with respect to 3.0 million shares of our common stock. The 2004 Director Plan provided for grants of nonqualified stock options to each of our directors who we do not employ.

Our 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan”), as amended, provided for the granting of stock options, stock appreciation rights, restricted stock, performance shares, and other share-based awards and benefits up to an aggregate of 1.8 million shares of common stock. Stock options granted could be either incentive stock options or nonqualified stock options. Options to purchase shares of common stock were typically granted with exercise prices equal to the fair value of the common stock on the date of grant.

In May 2025, our shareholders approved the National Research Corporation 2025 Omnibus Incentive Plan (the “2025 Omnibus Incentive Plan”), which became effective on May 7, 2025, and replaced the 2004 Director Plan and the 2006 Equity Incentive Plan. The 2025 Omnibus Incentive Plan provides for the granting of performance awards, stock options, stock appreciation rights, stock awards, restricted stock, and other share-based awards and benefits up to an aggregate of 5.0 million shares of our common stock. The exercise prices of options to purchase shares of common stock are typically equal to the fair value of the common stock on the date of grant. Options granted may be either incentive stock options or nonqualified stock options. Vesting terms and option terms vary with each grant. At December 31, 2025,672,000 restricted stock awards and 242,460 stock options had been granted, and 4.1 million shares of common stock were available for issuance pursuant to future grants under the 2025 Omnibus Incentive Plan.

Service-Based Stock Option Awards

We grant stock options to directors and selected executives with vesting based on specified service periods. Such vesting terms vary by grant and option award and generally range from immediate vesting tofive years following the date of grant. We recognize compensation expense on a straight-line basis over the service period specified in the award. We granted 253,481,54,530, and 96,359 service-based stock option awards during the years ended December 31, 2025, 2024, and 2023, respectively.

The fair value of service-based stock options granted in 2025, 2024, and 2023 were estimated using a Black-Scholes valuation model with the following weighted average assumptions:

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of our stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years we estimate that options will be outstanding. We consider groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes service-based stock option activity for the year ended December 31, 2025:

Performance-Based Stock Option Awards

We also grant stock options to selected executives with vesting contingent upon meeting certain Company-wide performance goals. The performance goals for options issued in 2024 are based on reaching a total recurring contract value target, measured at the end of the performance period, December 31, 2026. Vesting is also dependent upon remaining in our employment through the performance period. The performance awards issued in 2024 have asix-year contractual term. We recognize compensation expense prospectively from the date it is deemed probable that the performance goal will be met through the end of the performance period. We did not recognize compensation expense related to performance-based awards in 2025 or 2024 since achieving the performance goals was not deemed probable. We granted 404,833 performance-based stock option awards during the year ended December 31, 2024. No performance-based stock options were awarded in 2025 or 2023.

The fair value of performance-based stock options granted was estimated using a Black-Scholes valuation model with the following weighted average assumptions:

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of our stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years we estimate that options will be outstanding. We consider groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes performance-based stock option activity for the year ended December 31, 2025:

The following table summarizes information related to stock options for the years ended December 31, 2025, 2024, and 2023:

As of December 31, 2025, the total unrecognized compensation cost related to non-vested performance-based and service-based stock option awards was approximately $1.5 million which was expected to be recognized over a weighted average period of 1.1 years.

There was $132,000 and $584,000 in cash received from stock options exercised for the years ended December 31, 2025, and 2023, respectively. No cash was received for stock options exercised for the year ended December 31, 2024. We recognized $545,000, $440,000, and $997,000 of non-cash compensation for the years ended December 31, 2025, 2024, and 2023, respectively, related to options, which is included in selling, general and administrative expenses. The tax benefit realized for the tax deduction from stock options exercised was $21,000, $316,000, and $498,000 for the years ended December 31, 2025, 2024, and 2023, respectively.

Non-vested Stock Awards

We granted 872,000 non-vested shares of common stock during the year ended December 31, 2025. No shares of non-vested common stock were granted during the years ended December 31, 2024, or 2023. As of December 31, 2025, there were 829,000 non-vested shares of common stock outstanding and total remaining unrecognized compensation cost of $8.8 million which was expected to be recognized over a weighted average period of 2.28 years. We recognized non-cash compensation expense (benefit) of $2.8 million, ($156,000), and ($62,000) for the years ended December 31, 2025, 2024, and 2023, respectively, related to this non-vested stock, which is included in selling, general and administrative expenses.43,000 shares of restricted stock vested during the year ended December 31, 2025. No restricted stock vested during the years end December 31, 2024, and 2023.

The following table summarizes information regarding non-vested stock granted for the year ended December 31, 2025:

We lease printing, computer, other equipment, and office space in the United States. The remaining terms on these leases as of December 31, 2025, range from less thanone year to 5.09 years.

Certain equipment and office lease agreements include provisions for periodic adjustments to rates and charges. The rates and charges are adjusted based on actual usage or actual costs for internet, common area maintenance, taxes, or insurance, as determined by the lessor and are considered variable lease costs.

The components of lease expense for the years ended December 31, 2025, 2024, and 2023, included (in thousands):

Supplemental balance sheet information related to leases (in thousands):

Supplemental cash flow and other information related to leases were as follows (in thousands):

Undiscounted future payments under non-cancelable finance and operating leases at December 31, 2025, were as follows (in thousands):

We sponsor a qualified 401(k) plan covering substantially all associates with no eligibility service requirement. Under the 401(k) plan, we match 25% of the first 6% of compensation contributed by each associate. The employer contributions, which are discretionary, vest to participants at a rate of 20% per year. We contributed $511,000, $547,000, and $561,000, in 2025, 2024, and 2023, respectively, as a matching percentage of associate 401(k) contributions.

The Company assesses segment reporting in accordance with ASC 280,Segment Reporting. Based on how the business is managed and the financial information reviewed by our Chief Operating Decision Maker (“CODM”), who is our Chief Executive Officer, the Company operates as one operating segment and one reportable segment.

During the year ended December 31, 2025, the Company changed the measures of operating results that are regularly reviewed by the CODM for purposes of assessing performance and allocating resources. Segment information presented reflects the measures currently reviewed by the CODM. The change in measures did not impact the Company’s determination of a single operating and reportable segment.

The Company provides analytics and insight solutions designed to measure and improve patient and employee experience for healthcare organizations. All solutions and operations are managed on a consolidated basis and are primarily delivered within the United States.

The CODM evaluates the Company’s performance and allocates resources based on consolidated net income, which is the primary measure used to assess results against forecasts and historical trends. The accounting policies of the segment are the same as those described inNote 1–* Summary of Significant Accounting Policies*. Because the Company has a single operating segment, our segment results are identical to the amounts presented in our Consolidated Statements of Income, and we have no inter‑segment revenues or transfers.

In addition to consolidated net income, the CODM is regularly provided supplemental information regarding nonrecurring executive compensation (when applicable), noncash stock compensation expense, and the related income tax, as presented below (in thousands):

As the Company has asingle reportable segment, segment assets are not tracked separately and are reported on a consolidated basis in the consolidated balance sheet. All long-lived assets were located in the United States as of December 31, 2025, and 2024.

The Company evaluated subsequent events through the date the financial statements were issued and determined that there were no subsequent events that require recognition or disclosure.