NRC Q1 Earnings Dip Y/Y Amid Rising Interest Costs, Shares Up 13%

Shares of National Research Corporation NRC have gained 12.8% since the company reported its earnings for the quarter ended March 31, 2025, outperforming the S&P 500 index’s 0.7% growth during the same period. However, over the past month, NRC stock has edged down 0.6%, a milder decline compared to the broader market’s 1.6% drop.

For the first quarter of 2025, NRC reported earnings per share (EPS) of 25 cents compared to 27 cents a year earlier. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The company’s revenues of $33.6 million denoted a 5% decline from $35.3 million in the year-ago period. 

Net income totaled $5.8 million, a 9% decline from $6.4 million in the prior-year quarter. Operating income came in at $8.6 million, slightly below the $8.7 million posted in the first quarter of 2024, reflecting modest operational pressure amid lower revenue and higher interest costs.

National Research Corporation Price, Consensus and EPS Surprise

National Research Corporation price-consensus-eps-surprise-chart | National Research Corporation Quote

Other Key Business Metrics

One of the bright spots in the quarter was the sequential growth in total recurring contract value, marking the second consecutive quarter of improvement. This metric, considered by management as a leading indicator of future revenue growth, suggests that the company’s strategic realignment may be gaining traction.

On the cost side, total operating expenses fell to $25 million from $26.6 million a year earlier, aided by lower direct and selling, general and administrative (SG&A) costs. Direct expenses declined 6% to $13.1 million, while SG&A expenses dropped 8% to $10.4 million. Depreciation and amortization rose modestly to $1.5 million from $1.4 million.

The company also faced a notable rise in interest expense, which surged 49% year over year to $0.9 million, reflecting increased debt utilization, including a new $3.5 million drawdown from its line of credit during the quarter.

Management Commentary

CEO Michael D. Hays emphasized the momentum in rebuilding NRC’s sales force, calling it a “key milestone” that contributed to gains in pipeline, win rates and total sales. He stated that while rebuilding a sales organization is inherently gradual, the results already seen justify a more aggressive push in expanding the team. Hays highlighted the importance of a differentiated market message and broader product offerings in driving sales success.

Hays also credited chief operating officer Helen Hrdy for implementing operational efficiencies that have bolstered the company’s ability to invest in growth while continuing to return value to shareholders.

Notably, NRC announced a leadership transition, with Trent Green set to take over as CEO in June 2025. Introductory meetings with Green are scheduled for June 9 and 10, reinforcing the company’s intent to maintain transparency and engagement with stakeholders during the transition.

Factors Influencing Headline Numbers

The year-over-year decline in revenues and earnings was partially offset by tighter cost controls, but the increase in financing costs weighed on profitability. The company’s use of its revolving credit facility added $3.5 million in debt, while interest expense grew nearly $0.3 million from the previous year. Meanwhile, gross margin trends were not detailed in the earnings release, leaving some ambiguity around core business profitability drivers beyond revenues and operating expenses.

Deferred revenues, a forward-looking indicator, held steady at $15.5 million, suggesting stable contracted business levels, though not expanding materially in the short term.

Other Developments

During the quarter, NRC completed its existing share repurchase program, initially adopted in 2022. On April 25, the board of directors authorized a new repurchase plan for up to one million shares of common stock, signaling a continued commitment to shareholder returns. In addition, the company declared a quarterly dividend of 12 cents per share, payable on July 11 to shareholders of record as of June 27. These capital allocation moves underscore NRC’s strategy to balance reinvestment in growth with direct returns to shareholders.

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

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