Key Highlights

  • Third-quarter revenue rose 11% to $38.4 million from $34.6 million.
  • Total recurring contract value grew 9% to $154.1 million.
  • GAAP diluted EPS was $0.21, up from $0.18, while adjusted EPS was $0.21, down from $0.23.
  • Adjusted EBITDA was $10.9 million, a 28% margin versus 31% a year earlier.
  • Share repurchases reached $16.0 million in the quarter, and the quarterly dividend is $0.16 per share.

NRC Health Earnings: Why Did Revenue Grow 11% While Margins and Cash Flow Slipped?

NRC Health (NASDAQ:NRC) reported third-quarter results on Tuesday, October 27, with revenue of $38.4 million, up 11% from $34.6 million. GAAP net income was $4.7 million, or $0.21 per diluted share, compared with $4.1 million, or $0.18. As screened, the EPS estimate was $0.18, and the screen shows a 16.67% surprise.

Adjusted net income was $4.7 million, down from $5.0 million, and adjusted EPS was $0.21, down from $0.23. Adjusted EBITDA was $10.9 million, flat from a year earlier, with the margin at 28% against 31%. The release contains no financial guidance for future periods.

The company provides patient experience and feedback analytics to hospitals and health systems, sold mainly through recurring contracts.

Recurring Contract Value: What Is the Leading Indicator Saying?

Total recurring contract value, which the company calls a leading indicator of future revenue, rose 9% to $154.1 million. That growth is slower than the 11% revenue increase in the quarter.

Management said several long-standing customers renewed under multi-year agreements, and that a large customer went live on schedule. The chief executive described a strong quarter with sequential margin expansion, and said operating leverage should support higher profitability and free cash flow over time.

Nine-month revenue was $108.6 million, up from $102.2 million, a gain of about 6% by calculation.

Costs and Cash Flow: Why Did Operating Cash Flow Fall to $8.0 Million?

Operating income rose to $8.9 million from $7.7 million, or about 23% of revenue. Direct costs rose to $15.4 million from $12.4 million, while selling, general and administrative expense fell to $12.0 million from $12.3 million.

Operating cash flow was $8.0 million, down from $13.8 million, a 21% margin against 40%. Free cash flow was $7.0 million, an 18% margin versus 29%, and capital expenditures fell to $1.0 million from $3.6 million.

Nine-month free cash flow rose to $12.4 million from $9.7 million. Nine-month GAAP net income fell to $4.6 million from $9.8 million, reflecting management transition costs of $3.2 million and stock compensation of $8.8 million, up from $1.4 million.

Buybacks, Dividends and Debt: How Is NRC Funding Capital Returns?

The company repurchased $16.0 million of stock in the quarter, up from $9.3 million, and $25.6 million over nine months. Shares outstanding fell to 21.2 million from 22.6 million at year-end 2025.

A quarterly dividend of $0.16 per share was declared on October 14, payable on January 8, 2027 to holders of record on December 29. Dividends paid were $3.5 million in the quarter.

Notes payable rose to about $102.9 million from about $79.0 million at year-end, including $15.0 million of new borrowings in the quarter. Cash was $3.6 million, and shareholders' equity was negative $9.1 million, from positive $14.0 million. Deferred revenue rose to $20.3 million from $16.2 million.

What to Watch Next for NRC Health Results

Investors will watch whether recurring contract value growth catches up with revenue growth, whether the 28% adjusted EBITDA margin recovers, and how borrowing and buybacks interact with the $0.16 dividend payable January 8, 2027.