NRC Down 8% Despite Q2 Earnings Rising Y/Y on TRCV Growth

Revenues of $35.4 million indicated a 4% rise year over year. 

The company posted a GAAP net loss of $3.3 million, wider than a net loss of $0.1 million in the prior-year quarter. The quarterly loss reflected higher operating expenses, including costs associated with executive transition-related items and non-cash stock compensation. On an adjusted basis, net income increased to $6.9 million from $6.4 million a year earlier.

Other Key Business Metrics

A key operating metric, Total Recurring Contract Value (TRCV), increased 11% year over year to $151.9 million, marking the strongest growth in several quarters. Management attributed the improvement to broad-based momentum across the Experience, Market Insights and Governance Institute portfolios. The Governance Institute delivered its strongest bookings performance in seven years, while recurring revenue growth continued to outpace reported revenue growth, reflecting healthy demand for the company's subscription-based offerings.

Adjusted EBITDA was $9.4 million, representing a 27% margin, compared with $10.3 million and a 30% margin in the prior-year quarter. 

Total operating expenses climbed to $38.6 million from $32.5 million in the second quarter of 2025.

Balance Sheet Update

As of June 30, 2026, cash and cash equivalents were $3.3 million, down from $4.1 million at Dec. 31, 2025. Total assets increased to $136.2 million from $134.9 million at year-end 2025. 

Total liabilities rose to $129.6 million from $120.9 million at Dec. 31, 2025. 

Shareholders' equity declined to $6.5 million from $14 million at the end of 2025.

Cash Flows

Net cash provided by operating activities totaled $1.4 million, while free cash flow was approximately $0.1 million after capital expenditures. Management noted that operating cash flow reflected approximately $2.9 million in cash payments tied to previously announced equity award modifications and related executive tax obligations.

Management Commentary

Chief Executive Officer Trent Green said the quarter reflected strong execution across sales, product delivery and commercialization initiatives. He highlighted continued investment in artificial intelligence capabilities, including ambient listening technology within the Experience portfolio, as part of the company's strategy to improve clinical workflows and strengthen customer engagement.

Management also emphasized expanding the Governance Institute's offerings through new governance education and board effectiveness resources.

Green said the company continues to see healthy customer interest in its integrated portfolio, with larger healthcare organizations increasingly seeking solutions spanning patient experience, governance and consumer insights. He also noted that a recently announced landmark customer began implementation during the quarter, with additional revenue expected to be recognized as deployment progresses.

Factors Influencing the Quarter

Management said reported revenue growth was partially constrained by an accounting change related to certain reputation monitoring solutions. Under the revised arrangement, third-party vendor fees are recognized as contract revenue rather than operating expenses, creating an estimated two-percentage-point headwind to reported revenue growth during the quarter. The company expects this impact to moderate in the third and fourth quarters.

Profitability was also affected by higher operating expenses associated with expanding delivery teams, ongoing product investments and executive transition-related compensation. These investments were described as deliberate spending intended to support future revenue growth and long-term margin expansion as implementation activity catches up with the higher level of recurring contract value.

Guidance

Management said that it expects third-quarter revenues to increase sequentially and anticipates adjusted EBITDA margin to remain approximately in line with the first half of the year due to the timing of the company's annual customer conference. Management also reiterated its expectation for margin expansion in the second half as recurring revenue growth increasingly reflects the higher TRCV generated over recent quarters. In addition, executives said the effective tax rate is expected to normalize to approximately 40% during the third and fourth quarters after unusual tax impacts recorded in the second quarter.

Other Developments

The company's board declared a quarterly cash dividend of 16 cents per share, payable on Oct. 9, 2026, to shareholders of record as of Sept. 25, 2026. During the quarter, NRC Health repurchased approximately 397,000 shares under its existing $60 million authorization as part of its ongoing capital allocation strategy. Management also said it remains active in evaluating acquisition opportunities that could strengthen its platform and complement its existing capabilities. 

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research