Executive Summary

Q2 2024 was a steady but softer quarter: revenue declined 3.2% year over year to $35.0M and diluted EPS fell to $0.26, with operating margin essentially stable versus last year; management highlighted balance-sheet and strategic actions (credit amendment, product launches, acquisition) rather than near‑term growth acceleration .
The company extended and modified its credit facilities (SOFR + 235 bps, maturities to 2027, broader permitted uses) and declared a $0.12 quarterly dividend, positioning for continued dividends, potential buybacks, and M&A once credit amendments were finalized .
TRCV declined to ~$138M at June 30, 2024 (from $142M at YE 2023), while net indebtedness rose to ~$42M; management did not repurchase shares in Q2 pending the credit agreement amendment but retains authorization (~1.1M shares remaining) .
No Q2 earnings call; management provided strategic updates in the release (CX/EX enhancements, AI engine, and NOBL Health acquisition with ~$2M TRCV) that could serve as near‑term catalysts as products roll out and cross‑sell ramps .

What Went Well and What Went Wrong

What Went Well
- Credit flexibility improved: extended revolver to May 2027, amortization to 10 years, and permitted uses expanded to include dividends, repurchases, acquisitions, and capex, enhancing capital allocation optionality .
- Strategic portfolio moves: acquired NOBL Health for ~$6M cash + up to $1M earnout, adding rounding/workflow capabilities and ~$2M TRCV; announced rollouts of CX/EX features and an AI engine over ~30 days .
- Operating cost discipline: SG&A fell year over year in Q2 ($11.2M vs. $12.0M), helping keep operating margin roughly stable despite lower revenue .
What Went Wrong
- Top-line pressure: revenue declined 3.2% year over year to $35.0M, and net income fell to $6.2M (from $7.3M) with diluted EPS down to $0.26 (from $0.29) .
- TRCV slippage: TRCV ended Q2 at ~$138M vs. $142M at 12/31/23, indicating continued drag from churn/non‑renewals despite pipeline and product investments .
- Higher interest burden and tighter liquidity: interest expense rose year over year ($0.56M vs. $0.19M), cash declined ($0.5M vs. $6.7M at 12/31/23), and $9M was drawn on the line of credit at quarter end .

Financial Results

Income statement and margins (oldest → newest)

Metric	Q2 2023	Q1 2024 (derived)	Q2 2024
Revenue ($M)	36.161	35.313 (70.334 six‑mo − 35.021)	35.021
Operating Income ($M)	9.365	8.760 (17.625 six‑mo − 8.865)	8.865
Net Income ($M)	7.273	6.359 (12.534 six‑mo − 6.175)	6.175
Diluted EPS ($)	0.29	N/A (six‑mo diluted EPS 0.52; quarter not disclosed)	0.26
EBIT Margin (%)	25.9% (9.365/36.161)	24.8% (8.760/35.313)	25.3% (8.865/35.021)
Net Income Margin (%)	20.1% (7.273/36.161)	18.0% (6.359/35.313)	17.6% (6.175/35.021)

Notes: Q1 2024 figures are arithmetically derived from the six-month totals provided in the Q2 2024 press release .

Balance sheet and KPIs

KPI	Q4 2023	Q1 2024	Q2 2024
TRCV ($M)	142	N/A	138
Net Indebtedness ($M)	~30 (as of 12/31/23)	~40 (as of 3/31/24)	~42 (as of 6/30/24)
Cash & Equivalents ($M)	6.653	N/A	0.485
Line of Credit ($M)	—	N/A	9.0
Dividend per Share ($)	Regular quarterly (paid Jan 2024 $18M total with buybacks)	Regular quarterly	Declared $0.12 payable 10/11/24

Segment breakdown: Not disclosed/applicable; NRC reports consolidated results .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Financial Guidance (Revenue, EPS, Margins)	FY2024	None provided	None provided	Maintained “no formal guidance” posture
Dividend	Next payment	Regular quarterly dividend	$0.12 per share payable 10/11/24 (record 9/27/24)	Maintained quarterly dividend
Capital Allocation (Buybacks)	Ongoing	Authorization outstanding	~1.1M shares remain; no Q2 repurchases pending credit amendment	Capacity maintained; execution deferred in Q2
Credit Facility	Through 2027	Prior terms	Revolver maturity to 5/28/2027; term loans amortize over 10 yrs; SOFR + 235 bps; expanded permitted uses	Improved flexibility
Capex treatment (FCCR exclusion)	N/A	$25M renovations excluded	Increased to $27.5M	Incrementally favorable

Earnings Call Themes & Trends

Note: NRC did not host a Q2 2024 earnings call; updates were included in the press release .

Topic	Previous Mentions (Q4 2023)	Previous Mentions (Q1 2024)	Current Period (Q2 2024)	Trend
AI/Technology initiatives	Emphasis on technology and pace; goal to launch innovative products delivering ROI	Reorganized tech into nimble teams; investing in AI leadership; plan to deliver innovative AI solutions	Announced proprietary AI engine powering new products/features	Building from planning to initial product rollout
Sales force / Go‑to‑market	Sales team up >20% since mid‑2022; pipeline >$100M; focus on share gains	Added CRO and sales associates; comp and territories reworked to accelerate pipeline	No call; focuses on product release timing; repurchases paused pending credit amendment	Execution phase, awaiting revenue conversion
TRCV / Bookings	TRCV $142M; recurring new sales up 18% YoY in Q4	Expect sales from new products to ramp a few quarters behind costs; goal to generate TRCV several times annual investments	TRCV ~$138M at 6/30/24	Near‑term softness; medium‑term ramp targeted
Capital allocation	$55M returned in 2023; continued dividends and selective repurchases	$18M returned in Jan‑24; net debt to increase as investments ramp	Credit amendment broadens allowed uses; declared $0.12 dividend; repurchases paused in Q2	Flexibility enhanced; repurchases could resume
Product portfolio	Expanded CX/EX capabilities; win at Advocate Health	Plan to broaden CX, PX, EX; TAM to double	NOBL Health acquisition adds rounding/workflow; CX/EX new capabilities listed	Portfolio broadened via M&A + internal launches

Management Commentary

“The Company has elected to include strategic updates normally discussed in earning calls to a broader group of current and potential stockholders via its quarterly earnings releases.”
“The Company… will… release acquired and internally developed products and features including… CX… EX… NOBL Health’s rounding tool… [and] a proprietary AI engine powering new products and features.”
“Our technology teams have been reorganized into small, nimble teams… We’ve also invested in new AI and product leadership to ensure we will be delivering innovative AI solutions… at a pace unmatched before.”
“As part of this effort, we expect to increase our IT investment, especially in AI over several quarters… sales from new products and additional sales associates [to] ramp a few quarters behind initial cost, but to generate TRCV of several times the annual investments.”
“We have expanded our employee experience and consumer experience capabilities… Our sales pipeline exceeds $100 million… operating margin has improved throughout the year.”

Q&A Highlights

No Q2 2024 call was held; updates were provided via press release .
On the most recent calls (Q1 and Q4), management emphasized:
- AI/product cadence and reorganized tech teams to accelerate delivery .
- Sales force investments and a ramp lag before revenue conversion; TRCV expected to scale several times the annual investment .
- Capital returns and sequential margin improvements while pursuing broader CX/EX strategy and large‑client wins (e.g., Advocate Health) .

Estimates Context

Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue could not be retrieved at this time due to data access limits (S&P Global request cap exceeded). As a result, we cannot quantify beats/misses versus consensus in this report. We attempted to fetch: Primary EPS Consensus Mean, Primary EPS – # of Estimates, Revenue Consensus Mean, Revenue – # of Estimates for Q2 2024 [GetEstimates error].

Key Takeaways for Investors

Operating performance was stable but flat: modest revenue and EPS declines YoY with largely steady operating margin; near‑term fundamental acceleration likely hinges on product rollout and sales conversion later in 2024/2025 .
Enhanced financial flexibility: credit amendments extend maturities, align amortization, and expand permitted uses, paving the way for resumed buybacks and selective M&A alongside dividends; buybacks paused in Q2 pending the amendment but authorization remains .
Product/AI catalysts: rollout of CX/EX enhancements, a proprietary AI engine, and integration of NOBL’s rounding/workflow offerings should support cross‑sell and pipeline conversion over coming quarters .
TRCV trajectory mixed: down to ~$138M in Q2 vs $142M at YE 2023, consistent with a “build now, convert later” playbook; execution on sales ramp and product ROI is the key swing factor for the stock’s medium‑term narrative .
Liquidity watch items: cash down and LOC utilized by quarter‑end; interest expense rising with floating‑rate debt; however, facility amendments and ongoing cash generation provide levers to manage the investment cycle and capital returns .
Absent formal guidance and with no Q2 call, the story is about delivery: investors should monitor bookings/TRCV, product adoption, and any resumed repurchase activity as near‑term signals ahead of revenue inflection .

Appendix: Additional Data

Selected income statement details (Q2 2024 vs. Q2 2023):
- Revenue: $35.021M vs. $36.161M .
- Operating expenses: $26.156M vs. $26.796M (SG&A $11.221M vs. $11.966M) .
- Operating income: $8.865M vs. $9.365M .
- Net income: $6.175M vs. $7.273M; Diluted EPS: $0.26 vs. $0.29 .
Balance sheet snapshot (6/30/24 vs. 12/31/23):
- Cash & equivalents: $0.485M vs. $6.653M; Line of credit: $9.0M vs. $0M; Total liabilities: $78.9M vs. $73.5M; Shareholders’ equity: $40.2M vs. $49.0M .
Capital return: Dividend declared $0.12/share payable 10/11/24; ~1.1M shares remain under repurchase authorization; no Q2 repurchases .
NOBL Health acquisition: ~$6M upfront cash + up to $1M earnout; ~$2M TRCV added at acquisition date .

Sources:

Q2 2024 press release and financial statements .
Q2 2024 Form 8‑K and Item 2.02/Exhibit 99.1; credit amendment details .
Q1 2024 earnings call transcript (prepared remarks) .
Q4 2023 earnings call transcript (prepared remarks) .

NATIONAL RESEARCH CORP (NRC)·Q2 2024 Earnings Summary