National Research Q2 2025 Earnings Call Transcript

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July 29, 2025

Key Takeaways

  • Positive Sentiment: Q2 TRCV rose 2% sequentially—the third straight quarter of growth and the highest rate since early 2021, signaling potential top-line recovery.
  • Positive Sentiment: Adjusted EBITDA margin remained a robust 30%, reflecting disciplined cost management and efficiency in core operations.
  • Positive Sentiment: The company repurchased 382,000 shares (about 2% of outstanding stock) at an average price of $14.96 and maintained its regular dividend policy to offset dilution.
  • Positive Sentiment: NRC is one of only five vendors approved for all seven CMS CAHPS surveys and differentiates with a high-touch in-house customer success and implementation model.
  • Neutral Sentiment: New CEO Trent Green has been in role for under two months and is developing a strategic plan, with detailed investment initiatives to be shared next quarter.
AI Generated. May Contain Errors.
Earnings Conference Call
National Research Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Speaker 2

Hello everyone, and welcome to today's NRC Health second quarter 2025 earnings call. My name is Seb, and I'll be the operator for your call today. I'll now hand you over to Jordan N. Freeman, Vice President of Finance. Please go ahead.

Speaker 1

Thank you for joining NRC Health Q2 2025 earnings call. In this call, the company will make forward-looking statements. Such statements may be identified by the use of terms or phrases such as believe, expect, focus, potential, will, derivations thereof, and similar terms and phrases. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to risk and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements, including those risks and uncertainties as set forth in the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2024, and in our various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

Speaker 1

We disclaim any obligation to update or revise forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information. The company also plans to provide non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. Reconciliations of GAAP to non-GAAP financial information and a discussion of why the company believes providing this additional information is useful to investors is provided in the non-GAAP disclosure section of our earnings press release on Form 8-K for the three months ended June 30, 2025. With that, it's my pleasure to turn the call over to NRC Health's new Chief Executive Officer, Trent Green. Trent.

Operator

Good morning everyone, and thank you for joining us today. I'm Trent Green, and it's truly an honor to speak with you, having now been Chief Executive Officer of NRC Health for just under two months. For today's call, I'd like to start by introducing myself and sharing why my background and experience are uniquely suited to create value in this role. I'll then touch on Q2 performance highlights, and to close, I'll address some of the recurring questions I've been hearing from investors since joining NRC. My nearly three-decade-long career has been spent exclusively in healthcare and largely in roles directly inside of health systems or as a partner to health systems, which represent NRC's primary customer base.

Operator

I started my professional career at the Mayo Clinic and spent nearly a decade as a management consultant, which helped me develop a deep rolodex of industry connections that has served me well in subsequent roles, and I'm confident will bring value to NRC. Transitioning from consulting, I joined Legacy Health, a multi-hospital regional delivery system in the Pacific Northwest, where I oversaw marketing, public relations, and community engagement during my time as Chief Strategy Officer. I then served as President of the Medical Group, followed by President of the Flagship Medical Center, and ultimately I served as Chief Operating Officer for the system. In fact, I was a buyer of NRC's Market Insights product while at Legacy. I experienced firsthand the value it brings in terms of consumer insights for the purposes of global strategy development, service line positioning, and health system brand management.

Operator

Most recently, I was with One Medical, where I served as Chief Operating Officer and then CEO, leading the organization through expanded growth with new health system partners, the development of enhanced customer-centric care delivery offerings, and post-merger integration efforts with Amazon. Now officially the CEO of NRC for almost two months, I'm continuing to get up to speed on the business, meeting with leaders, listening to teams, speaking with customers, and immersing myself in the company's operations, market position, and long-term potential. All of that has given me insights into the transformations taking place in healthcare, and more importantly, the growing demand for deeper, more human-centered connections between healthcare providers and the people they serve. It's that exact intersection where human understanding meets healthcare delivery that NRC has championed for decades.

Operator

Our platform helps health systems deeply understand their patients, communities, and caregivers, enabling smarter decisions around brand, experience, and loyalty. That's not just operational, it's strategic. I've seen firsthand how organizations struggle to integrate patient voice, staff engagement, and real-time insights in the clinical and operational workflows. With our data-driven platform and longstanding provider partnerships, NRC is in a uniquely strong position to enable healthcare systems to elevate the patient experience, retain staff, and thrive in a value-based care environment. I joined NRC because I believe in its mission and potential. Since joining, I've been impressed by the commitment of NRC's associates to our mission and to our partners. While I'm still early in the role, I'm focused on learning quickly and leading with clarity as the company evolves into its next chapter of sustainable growth and deeper impact.

Operator

Now turning to our performance in the quarter, I'll comment on financial results, markets, and the competitive environment, as well as plans around executive hiring. From a financial perspective, rather than repeating the numbers in the press release, I'm going to focus on Total Recurring Contract Value, TRCV, adjusted EBITDA margin, and our approach to capital allocation. Q2 TRCV increased 2% sequentially, our third consecutive quarter of sequential growth and the highest sequential growth rate we've posted since early 2021. Given that TRCV tends to precede revenue, we view this as an early indicator of our ability to return to top-line growth. The TRCV growth reflected contributions from many of our associates. We've seen the strongest year-to-date sales since 2021, as our win rate % and average win size both increased year over year.

Operator

We attribute the trend to a stronger and highly motivated sales team executing on the comprehensive experience portfolio we rounded out last year. Notably, we added some brand new logos to our already impressive customer base. These health systems elected to transition to us based on the depth and integration of our capabilities and the human-centered nature of our customer service model. Retention measured by losses and downsells improved as well due to the strength of our customer success organization. In addition to TRCV growth, margin improvement is our other main financial goal. We're using adjusted EBITDA margin to track what we and many investors consider to be a proxy for our ongoing ability to generate cash for reinvestment or other capital allocation alternatives. Adjusted EBITDA margin remains consistently strong at 30%, reflecting disciplined cost management and efficiency in our core operations.

Operator

Adjusted EBITDA margin for the quarter primarily excludes non-recurring cash bonuses and equity grants for our executive team. With a transition from founder-led leadership, compensation arrangements for executive leaders were implemented to preserve philosophical and economic alignment with long-term shareholders. Just as an editorial, I've served in executive roles before, and this structure creates a deep level of responsibility from day one. A couple of notes about our capital allocation policy. We intend to continue paying dividends and utilizing share repurchases to offset dilution. When we believe the market price is attractive compared with the intrinsic value of our shares, we intend to allocate additional capital towards share repurchases. With modest leverage, positive cash flow generation, and healthy access to capital, we are well positioned to fund organic growth opportunities, M&A, and return cash to shareholders.

Operator

During the quarter, we paid our normal dividend and repurchased 382,000 shares, or approximately 2% of our outstanding stock at an average price of $14.96 per share. From a market perspective, our value proposition is resonating with customers despite budget pressure on our health system partners in a competitive environment. The top 400 largest healthcare systems form the sweet spot for our target market. These systems have bounced back somewhat post-pandemic and are now faced with a changing federal spending landscape. Attracting and retaining patients and frontline caregivers and delivering superior outcomes are more important than ever due to the lifetime value of a loyal consumer. While operating in a competitive environment, NRC Health is uniquely positioned to deliver what health systems need and an attractive return on their investment. We're working closely with existing and prospective clients to enable durable improvements in experience for patients, providers, and employees alike.

Operator

In terms of talent priorities, we are actively engaged in a search for our Chief Financial Officer, but we've been pleased with the interest we're seeing from a number of candidates with meaningful public company experience. I'd now like to address some of the recurring questions I've been hearing from investors since joining NRC. First, I fielded a number of questions around where things currently stand with the sales organization and what additional changes we're expecting to make there. Jason Rao, an NRC Boomerang, is now leading our sales organization. Jason is driving a reorganization of the team and aligning talent both geographically and around key products in our portfolio. While still early in this transition, we're encouraged by the positive momentum as reflected in the size of the pipeline and more concretely by the addition of new customer logos and sequential TRCV growth.

Operator

Second, investors are focused on the competitive environment and how we differentiate. In a healthcare experience space, a key defining capability is the ability to administer the Centers for Medicare & Medicaid Services, CMS, Consumer Assessment of Healthcare Providers and Systems surveys, also known as CAHPS surveys, of which there are seven distinct types for healthcare providers. Only five organizations hold CMS-approved vendor status for all seven CAHPS survey types. The field narrows further when looking at companies that offer both fully certified patient experience programs and robust employee engagement survey capabilities. NRC differentiates itself within this group in two important ways. First, deep healthcare experience and relationships, especially hospitals and health systems. Unlike other organizations, NRC is purpose-built for healthcare. This singular focus matters. Healthcare is unlike any other industry: complex, deeply human, and often emotionally charged.

Operator

We believe it's a competitive advantage to work with a partner that fully understands the unique pressures, regulations, and cultural realities of healthcare organizations. Second, a high-touch in-house customer success and implementation model. We don't outsource our implementations, and we don't rely on impersonal support lines. Instead, our clients work directly with a dedicated NRC team that knows their organization and is readily available to provide guidance, training, and strategic support. This hands-on approach builds trust, accelerates time to value, and helps organizations realize the full potential of their investments. Finally, I've been asked if there's any material investments I plan on making, and if so, if I have thoughts around the areas for or size of investment. I'm really excited about the value creation opportunities ahead. I've been spending time engaging with internal and external constituents as I work to put a strategic plan into place.

Operator

Q2 highlighted the opportunity ahead for NRC Health. Our third consecutive quarter of sequential TRCV growth, coupled with improved efficiency and a focus on long-term margin improvement, should lay the groundwork for sustainable momentum. However, at this point, I've been at NRC Health for less than two months. It's a bit early in the process for me to provide specific investment plans or timelines. I will continue to work with the team to put a strategic plan in place, and I look forward to providing details around our progress on next quarter's call. In closing, I want to express my gratitude to our associates for their commitment, to our customers for their trust, and to our shareholders for their support. I'm really excited for what's ahead, and I look forward to working closely with all of you on this journey.

Operator

As a reminder, if you have questions or want to engage further, please contact us at ir@nrchealth.com.

Speaker 2

Thank you. This concludes today's call, and you may now disconnect.

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