NRC HEALTH

Basis of Presentation

Our condensed consolidated balance sheet at December 31, 2025, was derived from our audited consolidated balance sheet as of that date. All other financial statements contained herein are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) that we consider necessary for a fair presentation of financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

Information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in our Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2026.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

Deferred Contract Costs

We defer incremental costs of obtaining customer contracts. These costs are amortized over the estimated term of the contract, including renewals, which generally ranges from three tofive years. We deferred incremental costs of obtaining a contract of $166,000 and $304,000 in the three-month periods ended June 30, 2026, and 2025, respectively and $1.1 million and $658,000 in the six-month periods ended June 30, 2026, and 2025, respectively. Deferred contract costs, net of accumulated amortization was $2.9 million and $2.5 million at June 30, 2026, and December 31, 2025, respectively. Total amortization by expense classification for the periods ended June 30, 2026, and 2025 was as follows (in thousands):

Commitments and Contingencies

There were no material changes to the Company’s commitments, contingencies, or legal proceedings from those disclosed in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2025.

Recent Accounting Pronouncements Not Yet Adopted

We monitor recently issued accounting pronouncements to assess their potential impact on our 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, 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, 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.

We derive a majority of our revenue from renewable subscription‑based service agreements with our customers. These arrangements represent a single promise to stand ready to provide services over the contractual term and are recognized ratably as the related services are provided. As a result, the significant majority of our revenue is recognized over time.

Revenue recognized over time totaled $32.9 million and $31.2 million for the three months ended June 30, 2026, and 2025, respectively and $66.1 million and $62.3 million for the six months ended June 30, 2026, and 2025, respectively. Revenue associated with performance obligations satisfied at a point in time, including one‑time specified services, as well as revenue from fixed, non‑subscription and unit‑priced service arrangements, was not material for either period.

Total revenue for the three months ended June 30, 2026, was $35.4 million, compared to $34.0 million for the three months ended June 30, 2025. Total revenue for the six months ended June 30, 2026, was $70.2 million compared to $67.6 million for the six months ended June 30, 2025. The increases were primarily attributable to growth in subscription‑based services.

Our revenue recognition patterns during the quarter are consistent with those disclosed in our Annual Report on Form 10‑K for the year ended December 31, 2025.

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

Deferred revenue increased by $0.5 million primarily due to new billings exceeding revenue recognized during the period.

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 June 30, 2026, approximated $188.3 million, of which $44.8 million is expected to be recognized during the remainder of 2026, with the balance recognized thereafter.

The effective tax rate was 28% and 61% for the three and six-month periods ended June 30, 2026, respectively, compared with 118% and 32% for the corresponding periods in 2025. The change in the three and six-month periods was primarily driven by changes in the impact of nondeductible executive compensation under IRC Section 162(m).

Our long‑term debt consists of amounts outstanding under the Credit Agreement entered into in February 2025, as described in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2025. There were no amendments, modifications, or new debt issuances during the three and six-month periods ended June 30, 2026. Our long-term debt consists of the following (in thousands):

As of June 30, 2026, we were in compliance with all financial covenants.

Our 2025 Omnibus Incentive Plan (the “2025 Omnibus Incentive Plan”), which became effective on May 7, 2025, provides for the granting of equity-based awards, as described in our Annual Report on Form 10-K for the year ended December 31, 2025. At June 30, 2026,3.9 million shares of common stock were available for issuance pursuant to future grants under the plan.

Service-Based Stock Option Awards

We grant stock options to directors and select executives with vesting based on specified service periods. Vesting terms vary with each grant and option awards are generally five toten 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 17,638 and 11,021 service-based stock option awards during the six-month periods ended June 30, 2026, and 2025, respectively.

The fair value of service-based stock options granted in 2026 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 service-based stock option activity for the six-month period ended June 30, 2026:

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 2026 or 2025 since achieving the performance goals was not deemed probable. There wasno activity related to performance‑based stock option awards during the six- month period ended June 30, 2026.

As of June 30, 2026, the total unrecognized compensation cost related to non-vested performance-based and service-based stock option awards was approximately $1.3 million which was expected to be recognized over a weighted average period of 2.0 years.

There was $139,000 and $132,000 of cash received from stock options exercised during the six-month periods ended June 30, 2026, and 2025, respectively. We recognized $70,000 and ($87,000) of non-cash compensation expense (benefit) for the three-month periods ended June 30, 2026, and 2025, respectively, and $315,000 and $84,000 of non-cash compensation expense for the six-month periods ended June 30, 2026, and 2025, respectively, related to options, which is included in selling, general, and administrative expenses.

Non-vested Stock Awards

We granted 700,000 shares of non-vested restricted stock awards (RSAs) during the six-month period ended June 30, 2025. No non-vested RSAs were granted in 2026. We recognized non-cash compensation expense of $6.8 million and $394,000 for the three-month periods ended June 30, 2026, and 2025, respectively, and $7.8 million and $394,000 for the six-month periods ended June 30, 2026, and 2025, respectively, related to non-vested RSAs, which is included in selling, general, and administrative expenses. As of June 30, 2026, the total unrecognized compensation expense related to non-vested RSAs was approximately $929,000 which is expected to be recognized over a weighted average period of 1.6 years. The following table summarizes non-vested RSAs activity for the six-month period ended June 30, 2026:

On April 27, 2026, the Compensation and Talent Committee of the Board of Directors approved amendments to certain equity awards granted to three executives in 2025. The amendments eliminated the Company's right to repurchase shares underlying the awards if the executives' employment terminated under certain circumstances prior to the third anniversary of the respective grant dates.

As a result of these amendments, the Company recognized approximately $6.5 million of accelerated stock-based compensation expense during the three and six months ended June 30, 2026, substantially all of which would otherwise have been recognized ratably through the second quarter of 2028.

Restricted Stock Units

We granted 198,485 restricted stock units (RSUs) during the six-month period ended June 30, 2026. No RSUs were granted in 2025. RSUs do not carry dividend or voting rights prior to vesting. At June 30, 2026,198,485 RSUs were outstanding, with total remaining unrecognized compensation expense of $2.7 million expected to be recognized over a weighted‑average period of 1.5 years. We recognized non‑cash compensation expense of $506,000 and $837,000 for the three and six-month periods ended June 30, 2026, respectively, related to RSUs, which is included in selling, general, and administrative expenses. No expense was recognized in 2025. The following table summarizes RSU activity for the six-month period ended June 30, 2026:

The amount of goodwill was $66,152 at June 30, 2026, andno impairments were recognized during the six-month period then ended.

Intangible assets consisted of the following (in thousands):

Basic net income (loss) per share was computed using the weighted-average shares of common stock outstanding during the period.

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

We had 447,981 and 403,145 options to purchase common stock for the three-month periods ended June 30, 2026, and 2025, respectively, and 436,396 and 434,520 options to purchase common stock for the six-month periods ended June 30, 2026, and 2025, respectively, that were excluded from the diluted net income (loss) per share computation because their inclusion would have been anti-dilutive. Performance-based stock option awards were not included in the computation since the applicable conditions had not been satisfied. We had 28,266 and 79,339 restricted stock units for the three-month and six-month periods ended June 30, 2026, respectively, excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive.

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 andone reportable segment.

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. 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 management transition costs, noncash stock compensation expense, and the related income tax, as presented below (in thousands):