NRC Health's Q3 Net Income Plunges 27.6% Amid Rising Costs

TL;DR

**NRC's financials are bleeding red, with net income nearly halved and debt soaring – time to bail on this one.**

AI Summary

NATIONAL RESEARCH CORP (NRC) reported a significant decline in net income for both the three and nine months ended September 30, 2025. Net income for the three months decreased by 27.6% to $4.122 million from $5.688 million in the prior year, while the nine-month net income plummeted by 46.2% to $9.802 million from $18.223 million. Revenue also saw a downturn, falling 3.4% to $34.608 million for the quarter and 3.7% to $102.196 million for the nine-month period. Operating expenses increased for the nine months by 4.6% to $84.275 million, primarily driven by a 20.6% rise in selling, general and administrative expenses to $40.360 million. Interest expense more than doubled for both periods, reaching $1.461 million for the quarter and $3.393 million for the nine months, reflecting increased borrowings. Cash and cash equivalents decreased to $2.219 million from $4.233 million at December 31, 2024. The company also significantly increased its notes payable to $76.025 million from $57.895 million, while shareholders' equity decreased by 54.3% to $14.314 million from $31.284 million.

Why It Matters

This filing reveals a concerning trend for NRC Health, with substantial declines in both revenue and net income, coupled with a significant increase in debt. For investors, the 46.2% drop in nine-month net income and the 54.3% reduction in shareholders' equity signal potential financial instability and could lead to further stock price depreciation. Employees might face increased pressure as the company navigates reduced profitability and higher operating costs. Customers could see impacts on service quality or pricing if the company seeks to cut costs or increase revenue. In the competitive healthcare analytics market, NRC Health's struggles could empower rivals, potentially leading to market share shifts.

Risk Assessment

Risk Level: high — The risk level is high due to a 46.2% decrease in net income for the nine months ended September 30, 2025, to $9.802 million, compared to $18.223 million in the prior year. Additionally, total liabilities increased significantly to $121.405 million from $101.255 million at December 31, 2024, while shareholders' equity decreased by 54.3% to $14.314 million, indicating a deteriorating financial position and increased leverage.

Analyst Insight

Investors should consider reducing or exiting their positions in NRC given the substantial decline in profitability, increasing debt, and shrinking shareholder equity. The negative financial trends suggest potential long-term challenges for the company in a competitive market.

Financial Highlights

debt To Equity

8.48

revenue

$102.196M

operating Margin

17.54%

total Assets

$135.719M

total Debt

$114.439M

net Income

$9.802M

cash Position

$2.219M

revenue Growth

-3.7%

Revenue Breakdown

Key Numbers

• $4.122M — Net Income (Q3 2025) (Down 27.6% from $5.688M in Q3 2024)
• $9.802M — Net Income (9M 2025) (Down 46.2% from $18.223M in 9M 2024)
• $34.608M — Revenue (Q3 2025) (Down 3.4% from $35.819M in Q3 2024)
• $102.196M — Revenue (9M 2025) (Down 3.7% from $106.154M in 9M 2024)
• $1.461M — Interest Expense (Q3 2025) (Up 106.9% from $706K in Q3 2024)
• $3.393M — Interest Expense (9M 2025) (Up 81.8% from $1.866M in 9M 2024)
• $121.405M — Total Liabilities (Sep 30, 2025) (Up from $101.255M at Dec 31, 2024)
• $14.314M — Total Shareholders' Equity (Sep 30, 2025) (Down 54.3% from $31.284M at Dec 31, 2024)
• $2.219M — Cash and Cash Equivalents (Sep 30, 2025) (Down from $4.233M at Dec 31, 2024)
• $76.025M — Notes Payable (Sep 30, 2025) (Up from $57.895M at Dec 31, 2024)

Key Players & Entities

• NATIONAL RESEARCH CORP (company) — Registrant
• NRC Health (company) — Doing business as
• SEC (regulator) — Securities and Exchange Commission
• $4.122 million (dollar_amount) — Net income for three months ended September 30, 2025
• $5.688 million (dollar_amount) — Net income for three months ended September 30, 2024
• $9.802 million (dollar_amount) — Net income for nine months ended September 30, 2025
• $18.223 million (dollar_amount) — Net income for nine months ended September 30, 2024
• $121.405 million (dollar_amount) — Total liabilities as of September 30, 2025
• $101.255 million (dollar_amount) — Total liabilities as of December 31, 2024
• $14.314 million (dollar_amount) — Total shareholders' equity as of September 30, 2025

FAQ

Risk Factors

• Increased Indebtedness and Interest Expense [high — financial]: The company has significantly increased its notes payable by $18.13 million to $76.025 million as of September 30, 2025. This has led to a more than doubling of interest expense, which rose by 106.9% to $1.461 million for the quarter and 81.8% to $3.393 million for the nine months. This heightened leverage increases financial risk and vulnerability to interest rate fluctuations.
• Declining Profitability and Equity [high — financial]: Net income has fallen sharply, down 27.6% to $4.122 million for the quarter and 46.2% to $9.802 million for the nine months. Concurrently, shareholders' equity has decreased by 54.3% to $14.314 million. This erosion of profitability and equity base raises concerns about the company's financial health and future growth prospects.
• Revenue Decline [medium — operational]: Revenue has experienced a downturn, decreasing by 3.4% to $34.608 million for the quarter and 3.7% to $102.196 million for the nine months. This indicates potential challenges in market demand, competitive pressures, or execution of sales strategies.
• Rising Operating Expenses [medium — operational]: Total operating expenses increased by 4.6% to $84.275 million for the nine months, primarily driven by a substantial 20.6% increase in selling, general and administrative (SG&A) expenses to $40.360 million. This rise in costs, coupled with declining revenue, is pressuring operating margins.
• Reduced Cash Position [medium — financial]: Cash and cash equivalents have decreased from $4.233 million at December 31, 2024, to $2.219 million as of September 30, 2025. This reduction in liquidity could limit the company's ability to meet short-term obligations or fund growth initiatives.

Industry Context

The market research and consulting industry, where National Research Corp operates, is characterized by intense competition and a need for continuous innovation to adapt to evolving client demands and data analytics technologies. Companies in this sector often rely on recurring revenue models and strong client relationships. Recent trends indicate a growing demand for data-driven insights and predictive analytics, putting pressure on firms to invest in technology and talent.

Regulatory Implications

While the 10-Q does not highlight specific new regulatory risks, companies in the data and analytics sector are subject to evolving data privacy regulations (e.g., GDPR, CCPA) which can impact data collection, storage, and usage practices. Compliance with these regulations requires ongoing investment and vigilance to avoid penalties and reputational damage.

What Investors Should Do

1. Monitor debt levels and interest coverage ratios.
2. Analyze the drivers of SG&A expense increase.
3. Evaluate the sustainability of the current revenue trend.
4. Assess the impact of declining shareholders' equity.

Glossary

Retained earnings (accumulated deficit)

The cumulative amount of net income that a company has retained over its lifetime, after accounting for dividends paid. A deficit means the company has accumulated losses. (NRC's retained earnings show an accumulated deficit of ($15.470 million) as of September 30, 2025, indicating that cumulative losses have outweighed cumulative profits.)

Treasury stock

Shares of a company's own stock that it has repurchased from the open market. It is recorded at cost and reduces total shareholders' equity. (NRC's treasury stock increased significantly, from $131.932 million to $152.031 million, reflecting share repurchases that reduce the number of outstanding shares and shareholders' equity.)

Deferred revenue

Revenue that has been received by a company but not yet earned, typically because the goods or services have not yet been delivered or performed. It is recorded as a liability. (Deferred revenue increased to $17.814 million from $15.786 million, suggesting a growing backlog of unfulfilled services or products, which could translate to future revenue.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its identifiable net assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and recognized. (NRC has $66.152 million in goodwill, unchanged from the prior year, indicating no new acquisitions or impairments recognized in this period.)

Operating lease right-of-use assets

Assets recognized by a lessee under a lease for the right to use an underlying asset for the lease term. These are recognized on the balance sheet as an asset and a liability. (The decrease in operating lease right-of-use assets from $1.627 million to $1.269 million suggests the company is reducing its leased asset footprint.)

Year-Over-Year Comparison

Compared to the prior year, National Research Corp has experienced a significant downturn in financial performance. Revenue has decreased by 3.7% for the nine months ended September 30, 2025. Profitability has been severely impacted, with net income plummeting by 46.2%. This decline is exacerbated by a substantial increase in operating expenses, particularly a 20.6% rise in SG&A, and a more than doubling of interest expense due to increased borrowings. Consequently, shareholders' equity has shrunk by 54.3%, while cash reserves have diminished, painting a bearish picture for the company's financial health.

Filing Documents

• nrc20250930_10q.htm (10-Q) — 1197KB
• ex_878546.htm (EX-10.1) — 45KB
• ex_878547.htm (EX-10.2) — 41KB
• ex_878548.htm (EX-31.1) — 12KB
• ex_878549.htm (EX-31.2) — 12KB
• ex_878550.htm (EX-32) — 7KB
• nrc01.jpg (GRAPHIC) — 6KB
• 0001437749-25-033793.txt ( ) — 6638KB
• nrc-20250930.xsd (EX-101.SCH) — 52KB
• nrc-20250930_cal.xml (EX-101.CAL) — 39KB
• nrc-20250930_def.xml (EX-101.DEF) — 366KB
• nrc-20250930_lab.xml (EX-101.LAB) — 337KB
• nrc-20250930_pre.xml (EX-101.PRE) — 399KB
• nrc20250930_10q_htm.xml (XML) — 1199KB

Financial Statements

Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Shareholders ' Equity 5 - 6 Condensed Consolidated Statements of Cash Flows 7 - 8 Notes to Condensed Consolidated Financial Statements 9 - 21 Item 2. Management ' s Discussion and Analysis of Financial Condition and Results of Operations 22 - 28 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 29 Item 4.

Controls and Procedures

Controls and Procedures 29 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 29 Item 1A.

Risk Factors

Risk Factors 29 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30 Item 5. Other Information 30 Item 6. Exhibits 31

Signatures

Signatures 32 Table of Contents Special Note Regarding Forward-Looking Statements Certain matters discussed in this Quarterly Report on Form 10-Q are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as National Research Corporation, doing business as NRC Health ("NRC Health," the "Company," "we," "our," "us" or similar terms), "believes," "expects," "may," "could," "anticipates," "estimates," "plans," "creates," "intends," or the use of words such as "would," "will," "may," "could," "goal," "focus," or "should," or other words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. In this Quarterly Report on Form 10-Q, statements regarding the value and utility of, and market demand for, our service offerings, future opportunities for growth with respect to new and existing clients, our future ability to compete and the types of firms with which we will compete, future adequacy of our liquidity sources, future revenue sources, future revenue, expenses, and margins, future revenue estimates used to calculate recurring contract value, the expected impact of economic factors, including interest rates and inflation, future capital expenditures and the timing, amount, and sources of cash to fund such capital expenditures, future stock repurchases and dividends, the expected impact of pending claims and contingencies, the future outcome of uncertain tax positions, and future non-cash charges related to executive equity awards, among others, are forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results or outcomes

– Financial Information

PART I – Financial Information

Financial Statements

ITEM 1. Financial Statements NATIONAL RESEARCH CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts and par value) September 30, 2025 December 31, 2024 (unaudited) Assets Current assets: Cash and cash equivalents $ 2,219 $ 4,233 Trade accounts receivable, less allowance for doubtful accounts of $ 50 and $ 40 , respectively 12,749 11,054 Prepaid expenses 4,460 3,480 Income taxes receivable - 141 Other current assets 973 692 Total current assets 20,401 19,600 Net property and equipment 41,413 38,269 Intangible assets, net 2,324 2,616 Goodwill 66,152 66,152 Operating lease right-of-use assets 1,269 1,627 Deferred contract costs, net 1,921 1,562 Other noncurrent assets 2,239 2,713 Total assets $ 135,719 $ 132,539 Liabilities and Shareholders ' Equity Current liabilities: Current portion of notes payable, net of unamortized debt issuance costs $ 4,012 $ 4,789 Accounts payable 1,094 1,194 Accrued wages and bonuses 7,124 4,774 Accrued expenses 3,900 5,091 Dividends payable 2,698 2,770 Deferred revenue 17,814 15,786 Income taxes payable 1,459 353 Other current liabilities 465 1,101 Total current liabilities 38,566 35,858 Notes payable, net of current portion and unamortized debt issuance costs 76,025 57,895 Deferred income taxes 3,451 3,531 Other long-term liabilities 3,363 3,971 Total liabilities 121,405 101,255 Shareholders' equity: Preferred stock, $ 0.01 par value, authorized 2,000,000 shares, none issued - - Common stock, $ 0.001 par value; authorized 110,000,000 shares, issued 31,954,158 in 2025 and 31,072,144 in 2024, outstanding 22,657,421 in 2025 and 23,083,116 in 2024 32 31 Additional paid-in capital 181,783 180,249 Retained earnings (accumulated deficit) ( 15,470 ) ( 17,064 ) Treasury stock, at cost; 9,296,737 and 7,989,028 Common shares in 2

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