NATIONAL RESEARCH CORP Quarterly Report Released - Here’s What You Should Know

National Research Corporation
Quarter Ended September 30, 2025 – Investor Summary

Key Financial Metrics:

• Revenue: $34.6 million for Q3 2025, down 3% from $35.8 million in Q3 2024; $102.2 million YTD 2025, down 4% from $106.2 million in YTD 2024. Main declines in subscription-based revenue.
• Net Income: $4.1 million for Q3 2025 (vs. $5.7 million Q3 2024); $9.8 million YTD 2025 (vs. $18.2 million YTD 2024).
• EPS: $0.18 basic/diluted for Q3 2025 (vs. $0.24 Q3 2024); $0.43 YTD 2025 (vs. $0.76 YTD 2024).
• Operating Margin: 22% in Q3 2025 (flat YoY); 18% for YTD 2025 (down from 24% YTD 2024).
• Operating Income: $7.7 million Q3 2025 ($8.0 million Q3 2024); $17.9 million YTD 2025 ($25.6 million YTD 2024).
• Cash Flow from Operations: $19.3 million YTD 2025 (vs. $28.2 million YTD 2024).
• Cash Position: $2.2 million at September 30, 2025 ($4.2 million at December 31, 2024).
• Working Capital: Deficit of $18.2 million at September 30, 2025 ($16.3 million at December 31, 2024).
• Dividends Paid: $8.3 million YTD. $2.7 million declared for the quarter.
• Share Repurchases: 618,264 shares bought in Q3 2025 under 2025 Program at average prices between $12.84-$15.48.

Balance Sheet Highlights:

• Total Assets: $135.7 million ($132.5 million at year-end 2024).
• Total Liabilities: $121.4 million ($101.3 million at year-end 2024).
• Shareholder Equity: $14.3 million ($31.3 million at year-end 2024).
• Long-term Debt: $76.0 million net of current portion, up from $57.9 million at year-end.
• Deferred Revenue: $17.8 million current portion (up from $15.8 million), $0.13 million non-current.

Key Changes & Trends:

• Revenue decline due to lower subscription-based contracts, offset slightly by increases in one-time and fixed services.
• Direct expenses down 19% for Q3 and 10% YTD, mainly due to staff and variable savings.
• SG&A expenses up 12% in Q3 and 21% YTD, primarily from higher personnel costs, professional fees, and executive compensation (notably $8.0 million in executive non-cash compensation in Q2).
• Interest expense more than doubled YTD ($3.4 million vs $1.9 million YTD 2024) due to higher borrowings following new credit agreements.
• Capex: $9.6 million spent YTD, focused on technology and software.

Risks & Considerations:

• Revenue pressure continues, especially in core subscription business. Total Recurring Contract Value rose 8% YoY ($141.7 million vs. $131.6 million), but has not translated to revenue growth yet.
• Rising SG&A and interest expense are compressing net income and margins significantly.
• Leverage increased: higher long-term debt and increased interest exposure. Credit facility is secured by substantially all company assets.
• Working capital deficit persists; large share repurchases and dividend payouts amid these deficits could pressure liquidity further.
• Tax Law Changes: Enactment of the "One Big Beautiful Bill Act" contributed to a higher tax rate (34% Q3 vs. 22% Q3 2024).
• Ongoing stock repurchase program may reduce float but further reduces cash and equity in a weakened earnings environment.

Other Considerations:

• Management Change: Shane Harrison named CFO in September 2025.
• AI-Enabled Solutions Remain Focus: Investment in AI-enabled subscription services is ongoing, but competitive, regulatory, and executional risks persist.
• No significant legal proceedings or material changes to market risk exposures disclosed.

Investor Takeaways:
Earnings and cash flow continue to decline due to falling subscription revenue, increased costs, and rising financial leverage. Liquidity is supported by credit lines but offset by ongoing share repurchases and dividends. Margins tightened, especially as operating income fell 30% YTD and net income dropped 46%. Management is investing heavily in people and technology, but must reverse top-line declines to sustain long-term shareholder returns and balance sheet health.

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