Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

Our purpose is to humanize healthcare and support organizations in their understanding of each unique individual. Our commitment to Human Understanding® helps leading healthcare systems improve their operations through understanding each person they serve not as point-in-time insights, but as an ongoing relationship. Our end-to-end solutions enable our customers to understand what matters most to each person they serve - before, during, after, and beyond clinical encounters - to gain a longitudinal understanding of how life and health intersect, with the goal of developing lasting, trusting relationships. Our ability to measure what matters most and systematically capture, analyze, and deliver insights based on self-reported information from patients, families, and consumers is critical in today's healthcare market. We believe access to, analysis of, and acting on our extensive individual-driven information is increasingly valuable as healthcare providers need to better understand and engage the people they serve to create long-term relationships, build loyalty, and improve processes.

Our portfolio of subscription-based solutions provides actionable information and analysis to healthcare organizations across a range of mission-critical, constituent-related elements, including patient experience, service recovery, care transitions, employee engagement, reputation management, and brand loyalty. We partner with customers across the continuum of healthcare services and believe this cross-continuum positioning is a unique and an increasingly important capability as the evolving healthcare landscape drives its constituents towards a more collaborative and integrated service model.

Results of Operations

The following table sets forth, for the periods indicated, selected financial information derived from our condensed consolidated financial statements and the percentage change in such items versus the prior comparable period, as well as other key financial metrics. The discussion that follows the information should be read in conjunction with our condensed consolidated financial statements.

Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025

		Three Months Ended June 30,								Percentage Increase (Decrease)
		2026				2025				2026 over 2025
		(In thousands, except percentages)								(Percentage)
Revenue		$	35,392			$	34,038				4
Direct expenses			13,564				12,974				5
Selling, general, and administrative			22,945				17,734				29
Depreciation and amortization			2,121				1,742				22
Operating income (loss)			(3,238	)			1,588				(304	)
Total other expense			(1,299	)			(1,007	)			29
Provision for income taxes			(1,254	)			687				(283	)
Effective tax rate			28	%			118	%			(90	)
Operating margin			(9	)%			5	%			(14	)

Revenue. Revenue in the 2026 period increased compared to the 2025 period by $1.4 million. This was mainly from $1.2 million higher recurring revenue from existing customers compared to the prior year, and $0.9 million higher revenue from new customers, compared to the prior year, partially offset by new contra-revenue of $0.7 million related to sales where we act as an agent in the delivery of third-party solutions.

Direct expenses. Direct expenses consist primarily of salaries and employee benefits, employee travel and lodging, materials, contract labor, third party software subscription costs, hosted customer conferences, and other direct expenses associated with revenue. Personnel costs within direct expenses are associated with individuals in product delivery, customer support, thought leadership, conference support, technology infrastructure, and product development. Direct expenses represented 38% of revenue for both the 2026 and 2025 periods. Direct expenses increased to $13.6 million for the 2026 period from $13.0 million for the same period in 2025, primarily driven by higher survey delivery services and increased spending on contractor services and computer subscription costs related to continued investments in technology and development.

Selling, general, and administrative expenses. Selling, general, and administrative expenses consist of salaries and employee benefits, commissions and amortization of deferred commissions, stock-based compensation, employee travel and lodging, third party software subscription and platform costs, marketing costs, facility expenses, office expenses, fees for professional services, provision for credit losses, and other operational expenses. Personnel costs within selling, general, and administrative expenses are associated with individuals in sales, marketing, finance, accounting, business development, human resources, administrative, product development, internal information systems, and executive management. Selling, general, and administrative expenses increased to $22.9 million for the 2026 period, from $17.7 million for the same period in 2025. The increase was primarily driven by $7.1 million of higher stock-based compensation expense related to executive leadership. This increase in stock-based compensation expense primarily related to previously disclosed amendments to certain executive equity awards. We do not expect similar amendments to be recurring events. Accordingly, the increase in stock-based compensation expense in the reported period is not necessarily indicative of such expense in future periods. The increase was also driven by approximately $0.5 million of higher salary expense for executives who were not present for the same period in 2025. These increases were partially offset by $3.2 million of lower executive leadership transition bonus expense compared to the prior-year period. The remaining increase was attributable to higher travel and computer software subscription expenses to support continued investment in technology.

Depreciation and amortization. Depreciation and amortization expenses increased in the 2026 period compared to the 2025 period due to the completion of our headquarters building renovations in June 2025.

Operating income (loss) and margin. Operating income swung to a loss in the 2026 period compared to the 2025 period due to the increased compensation related to our executive leadership transition and increased investment in technology, partially offset by revenue growth.

Total other expense. Total other expense increased in the 2026 period compared to the 2025 period due to higher interest expense due to a higher balance on long term debt.

Provision for income taxes and effective tax rate. Provision for income taxes changed to a benefit in the 2026 period from an expense in the 2025 period, primarily due to a pre-tax loss in the 2026 period compared to pre-tax income in the 2025 period. The effective tax rate decreased in the 2026 period primarily because the 2025 rate reflected a small pre-tax income base that magnified the impact of nondeductible items, specifically executive compensation subject to nondeductible executive compensation under IRC Section 162(m), whereas in the 2026 period, the pre-tax loss minimized the impact of these nondeductible items.

Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025

		Six Months Ended June 30,								Percentage Increase (Decrease)
		2026				2025				2026 over 2025
		(In thousands, except percentages)								(Percentage)
Revenue		$	70,195			$	67,588				4
Direct expenses			27,210				26,031				5
Selling, general, and administrative			36,364				28,089				29
Depreciation and amortization			4,290				3,284				31
Operating income			2,331				10,184				(77	)
Total other expense			(2,489	)			(1,880	)			32
Provision for income taxes			(97	)			2,623				(104	)
Effective tax rate			61	%			32	%			29
Operating margin			3	%			15	%			(12	)
Total recurring contract value (TRCV)		$	151,904			$	136,952				11
Cash provided by operating activities			8,566				5,507				56

Revenue. Revenue in the 2026 period increased compared to the 2025 period by $2.6 million. This was mainly from $2.8 million higher recurring revenue from existing customers compared to the prior year, and $0.5 million higher revenue from new customers, compared to the prior year, partially offset by new contra-revenue of $0.7 million related to sales where we act as an agent in the delivery of third-party solutions.

Direct expenses. Direct expenses represented 39% of revenue for both the 2026 and 2025 periods. Direct expenses increased to $27.2 million in 2026 from $26.0 million in 2025, primarily driven by survey delivery services and increased spending on contractor services and computer subscription costs related to continued investments in technology and development.

Selling, general, and administrative expenses. Selling, general, and administrative expenses increased $8.3 million to $36.4 million for the 2026 period, from $28.1 million for the same period in 2025. The primary driver was salaries and benefits due to $8.5 million of higher stock-based compensation related to executive leadership. Consistent with the discussion above for the three-month period, this increase in stock-based compensation primarily related to previously disclosed amendments to certain executive equity awards, which are not expected to recur. Accordingly, the increase in stock-based compensation expense for the six-month period is not necessarily indicative of such expense in future periods. The increase was also driven by $1.1 million of higher salary expense for executives who were not present for the same period in 2025, partially offset by $3.3 million of lower bonus expense paid as part of our executive leadership transition. The remaining increase was attributable to higher computer subscription expenses to support continued investment in technology, increased travel, regulatory-related accruals, and the timing of corporate-related expenses.

Depreciation and amortization. Depreciation and amortization expenses increased in the 2026 period compared to the 2025 period due to the completion of our headquarters building renovations in June 2025.

Operating income and margin. Operating income decreased in the 2026 period compared to the 2025 period due to the increased compensation related to our executive leadership transition and continued investment in technology, partially offset by revenue growth.

Total other expense. Total other expense increased in the 2026 period compared to the 2025 period due to higher interest expense on a higher balance on long term debt.

Provision for income taxes and effective tax rate. Provision for income taxes changed to a benefit of $0.1 million in the 2026 period from an expense of $2.6 million in the 2025 period, primarily due to lower pre-tax income. The effective tax rate increased in the 2026 period primarily due to executive compensation subject to the deductibility limitations under IRC Section 162(m) and other non-deductible items, which had a magnified impact given the reduced pre-tax base. For the reasons described in the discussion above for the three-month period, we do not expect our tax provision for 2026 or 2025 periods to be indicative of our tax provision for the second half of 2026.

Total recurring contract value (TRCV). TRCV at June 30, 2026 was higher compared to June 30, 2025, primarily due to sales to new and existing customers. We view TRCV as a leading indicator of our future revenue trends. TRCV represents the total annualized contract value of recurring amounts under customer contracts that are in effect or contractually committed as of the most recent quarter-end and are expected to be in force over the subsequent 12 months, based on contractual pricing and term provisions. TRCV is calculated using contracted recurring fees and assumes no upsells, downsells, price changes, early terminations, or non-renewals, unless we have been notified of such changes by the customer as of the measurement date. TRCV is an operating metric and is not a measure of revenue recognized under U.S. GAAP. The timing and amount of revenue we recognize under ASC 606 may differ from the pattern implied by TRCV due to allocation of transaction price and the timing of satisfaction of performance obligations. As a result, there is typically a lag between changes in TRCV and changes in our reported revenue. Generally, if we are able to sustain growth in TRCV, we would expect revenue growth to follow within subsequent periods, although intervening factors may affect this relationship.

Non-GAAP Financial Measures

In addition to consolidated GAAP financial measures, we review various non-GAAP financial measures that management believes to be important in the evaluation of its operating results and performance, including "Adjusted Net Income," "Adjusted Earnings per Share," "Adjusted EBITDA," "Adjusted EBITDA Margin," "Free Cash Flow," and "Free Cash Flow Margin."

We believe Adjusted Net Income, Adjusted Earnings per Share, Adjusted EBITDA, and Adjusted EBITDA Margin are helpful supplemental measures to assist management and investors in evaluating our operating results as (i) they exclude certain items that are unusual in nature or whose fluctuation from period to period do not necessarily correspond to changes in the operations of our business, and (ii) the exclusion of non-cash stock compensation is useful for investors applying certain valuation metrics and is consistent with the leverage ratio for our credit facility.

Adjusted Net Income represents net income adjusted to add back management transition costs and non-cash stock compensation and the related tax. The income tax effect on non-GAAP adjustments is calculated by applying the Company's blended federal and state statutory rate to the deductible portion of each adjustment; amounts nondeductible under Section 162(m) of the Internal Revenue Code receive no tax effect. Adjusted EBITDA represents net income before interest, taxes, depreciation, amortization, executive transition costs, and non-cash stock compensation items. Adjusted EBITDA Margin represents Adjusted EBITDA divided by revenue.

Management transition costs, presented in the Company's prior earnings releases as "non-recurring executive compensation," consist of costs related to the Company's executive leadership transition. The caption was revised in the current period to more accurately reflect the composition of these costs. For the three and six months ended June 30, 2025, these costs consisted of bonuses tied to compensation arrangements for our new CEO and existing executive leaders. For the three and six months ended June 30, 2026, these costs consist of bonuses paid to certain executives to cover anticipated tax obligations in connection with amendments to their 2025 equity awards, as previously disclosed, and approximately $270,000 of severance costs incurred in connection with team restructurings implemented by newly appointed executives.

We consider Free Cash Flow to be a measure that provides useful information to management and investors about our liquidity. Free Cash Flow does not represent residual cash flow available for discretionary expenditures. We define Free Cash Flow as net cash provided by operating activities less capital expenditures. Free Cash Flow Margin represents Free Cash Flow divided by revenue.

We view Adjusted Net Income, Adjusted Earnings per Share, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, and Free Cash Flow Margin as operating performance measures. As such, we believe the most directly comparable GAAP financial measures to Adjusted Net Income and Adjusted Earnings per Share are GAAP Net Income and GAAP Earnings per Share, respectively, the most directly comparable GAAP financial measure to Adjusted EBITDA and Adjusted EBITDA Margin is GAAP Net Income and GAAP Net Income Margin, and the most directly comparable GAAP financial measure to Free Cash Flow and Free Cash Flow Margin is GAAP Net Cash Provided by Operating Activities and GAAP Net Cash Provided by Operating Activities Margin.

Non-GAAP measures are supplemental financial measures of our performance and should not be considered substitutes for net income, earnings per share, or any other measure derived in accordance with GAAP. This information should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. There are limitations to these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items or events being adjusted. In addition, other companies may use different measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.

Adjusted Net Income and Adjusted Earnings per Share

The following table presents a reconciliation of GAAP net income and GAAP earnings per share to adjusted net income and adjusted earnings per share, respectively, for each of the periods indicated (in thousands excluding earnings per share):

		Three months ended June 30,								Six months ended June 30,
		2026				2025				2026				2025
Net income (loss)		$	(3,283	)		$	(106	)		$	(61	)		$	5,681
Add back:
Management transition costs1			3,160				6,640				3,160				6,640
Tax on non-recurring compensation2			(180	)			(468	)			(180	)			(468	)
Non-cash stock compensation			7,371				307				8,979				478
Tax on non-cash stock compensation2			(210	)			22				(470	)			(21	)
Adjusted net income		$	6,858			$	6,395			$	11,428			$	12,310
Earnings (loss) per share of common stock, diluted		$	(0.15	)		$	(0.01	)		$	(0.01	)		$	0.25
Weighted average shares and share equivalents outstanding, diluted			22,009				22,658				21,905				22,820
Adjusted earnings per share of common stock, diluted		$	0.31			$	0.28			$	0.52			$	0.54
Adjusted weighted average shares and share equivalents outstanding, diluted			22,113				22,661				22,049				22,820

¹ See 'Non-GAAP Financial Measures' above for a description of the composition of management transition costs and the change from prior period presentation.

² The income tax effect on management transition costs and non-cash stock compensation reflects only the tax deductible portion of these add-backs; compensation subject to the deduction limitation under Section 162(m) of the Internal Revenue Code receives no offsetting tax benefit. Because the current period reflects a pre-tax loss rather than pre-tax income, the income tax provision does not fully reflect the impact of the non-deductibility that would be captured in a profitable period, which has the effect of increasing Adjusted Net Income for the period.

Adjusted EBITDA and Adjusted EBITDA Margin

The following table presents a reconciliation of GAAP net income and GAAP net income margin to adjusted EBITDA and adjusted EBITDA margin, respectively, for each of the periods indicated (in thousands):

		Three months ended June 30,								Six months ended June 30,
		2026				2025				2026				2025
Net income (loss)		$	(3,283	)		$	(106	)		$	(61	)		$	5,681
Add back:
Depreciation and amortization			2,121				1,742				4,290				3,284
Interest expense			1,321				1,032				2,576				1,931
Income taxes			(1,254	)			687				(97	)			2,623
Management transition costs1			3,160				6,640				3,160				6,640
Non-cash stock compensation			7,371				307				8,979				478
Adjusted EBITDA		$	9,436			$	10,302			$	18,847			$	20,637
Net income (loss) margin			(9	)%			-	%			-	%			8	%
Adjusted EBITDA margin			27	%			30	%			27	%			31	%

¹ See 'Non-GAAP Financial Measures' above for a description of the composition of management transition costs and the change from prior period presentation.

Free Cash Flow and Free Cash Flow Margin

The following table presents a reconciliation of GAAP net cash provided by operating activities and net cash provided by operating activities margin to free cash flow and free cash flow margin, respectively, for each of the periods indicated (in thousands):

		Three months ended June 30,								Six months ended June 30,
		2026				2025				2026				2025
Net cash provided by (used in) operating activities		$	1,386			$	(1,139	)		$	8,566			$	5,507
Less:
Capital expenditures			1,324				3,010				3,158				5,996
Free cash flow		$	52			$	(4,149	)		$	5,408			$	(489	)
Net cash provided by (used in) operating activities margin			4	%			(3	)%			12	%			8	%
Free cash flow margin			-	%			(12	)%			8	%			(1	)%

Liquidity and Capital Resources

Our Board of Directors has established priorities for capital allocation, which include funding of innovation and growth investments, including merger and acquisition activity as well as internal projects, and returning capital to shareholders through dividends and share repurchases.

As of June 30, 2026, our principal sources of liquidity included $3.3 million of cash and cash equivalents, up to $17.0 million of unused borrowings under our Revolving Loan and an additional $27.6 million on our Delayed Draw Term Loan.

Our cash flows from operating activities primarily consist of net income adjusted for non-cash items including depreciation and amortization, deferred income taxes, share-based compensation, and the effect of working capital changes. For the six months ended June 30, 2026, cash provided by operating activities increased compared to the same period in 2025 primarily due to higher net income net of non-cash items and working capital changes. Working capital changes were mainly driven by trade accounts receivable and prepaid expenses primarily due to timing of billings and payments, and higher deferred revenue, partially offset by the timing of income tax payments and lower accrued expense balances.

See the Condensed Consolidated Statements of Cash Flows included in this report for the detail of our operating cash flows.

We had a working capital deficit of $12.2 million and $16.4 million on June 30, 2026, and December 31, 2025, respectively. The change was primarily due to an increase in income taxes receivable and prepaid expenses, together with decreases in accrued wages and bonuses, income taxes payable, and other current liabilities. These favorable changes were partially offset by decreases in cash and cash equivalents and trade accounts receivable, and by an increase in deferred revenue. Cash and cash equivalents decreased mainly due to the payment of dividends and the repurchase of shares of our common stock for treasury, partially offset by cash from operating activities. Our working capital is significantly impacted by our large deferred revenue balances, which will vary based on the timing and frequency of billings on annual agreements. Notwithstanding our working capital deficit on June 30, 2026, we believe that our existing sources of liquidity, including cash and cash equivalents, borrowing availability, and operating cash flows will be sufficient to meet our projected capital and debt maturity needs for the foreseeable future.

Cash used in investing activities primarily consisted of capitalized internal-use software and purchases of property and equipment including computer software and hardware, building improvements, and furniture and equipment.

Cash used in financing activities consisted of payments of dividends on our common stock, payments and borrowings on our Delayed Draw Term Loan and Revolving Loan, repurchases of common stock, and cash to pay contingent consideration related to our 2024 acquisition of Nobl Health.

Our material cash requirements include the following contractual and other obligations:

Dividends

Cash dividends of $3.6 million were paid in the six months ended June 30, 2026. Additional dividends of $3.5 million were declared in the three months ended June 30, 2026, and paid in July 2026. The dividends were paid from cash on hand and borrowings on our Revolving Loan. Our Board of Directors considers whether to declare a dividend and the amount of any dividends declared on a quarterly basis.

Capital Expenditures

We paid cash of $3.2 million for capital expenditures in the six months ended June 30, 2026. These expenditures consisted primarily of computer hardware and software, and costs related to software development for our Human Understanding® solutions.

Debt

Our credit agreement (the "Credit Agreement"), includes (i) a $30.0 million revolving credit facility (the "Revolving Loan") and (ii) a $110.0 million delayed draw-down term facility (the "Delayed Draw Term Loan" and, together with the Revolving Loan, the "Credit Facilities"). The Delayed Draw Term Loan includes an accordion feature that, so long as no event of default exists or would exist after giving effect to such increase, allows us to request an increase in the Delayed Draw Term Loan of up to the lesser of (x) $25.0 million and (y) our EBITDA as of the preceding four fiscal quarters, exercisable in increments of $10.0 million (or the remaining available amount of the accordion, if less). We may use the Delayed Draw Term Loan to fund permitted future business acquisitions, repurchases of our common stock, capital expenditures, or payment of dividends and the Revolving Loan to fund ongoing working capital needs and for other general corporate purposes.

Interest accrues and is payable monthly at a floating rate equal to the one-month Term SOFR plus a percentage per annum determined by our cash flow leverage ratio, ranging from 2.25% to 2.75% (5.97% at June 30, 2026).

The outstanding balance on the Delayed Draw Term Loan was $77.3 million at June 30, 2026. Principal amounts outstanding are due and payable monthly during the term of the Delayed Draw Term Loan, in equal monthly installments to amortize the aggregate outstanding principal balance by (i) 5% during each of the first three years and (ii) 7.5% during each of the fourth and fifth years following the date of such loan. All outstanding principal and interest on the Delayed Draw Term Loan are due and payable in full at the maturity date, February 6, 2030. We had the availability to borrow an additional $27.6 million on the Delayed Draw Term Loan at June 30, 2026, excluding the accordion feature.

Principal amounts outstanding under the Revolving Loan are due and payable in full at maturity at February 6, 2028. As of June 30, 2026, we had $13.0 million outstanding and the availability to borrow $17.0 million on the Revolving Loan. Our weighted average borrowings for the three-month periods ended June 30, 2026, and 2025 were $5.9 million and $8.2 million, respectively. Our weighted average borrowings for the six-month periods ended June 30, 2026, and 2025 were $4.7 million and $5.1 million, respectively. The weighted average interest rate on borrowings during the three-month periods ended June 30, 2026, and 2025 was 5.99% and 6.67%, respectively, and 6.01% and 6.67% during the six-month periods ended June 30, 2026, and 2025, respectively.

We are obligated to pay ongoing unused commitment fees quarterly in arrears at a percentage per annum determined by our cash flow leverage ratio, ranging from 0.15% to 0.30%, based on the actual daily unused portions of the Revolving Loan and the Delayed Draw Term Loan, respectively.

The Credit Agreement is collateralized by substantially all of our assets, subject to permitted liens and other agreed exceptions, and contains customary representations, warranties, affirmative and negative covenants (including financial covenants), and events of default. The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of our common stock, and acquisitions, subject in each case to certain exceptions. Pursuant to the Credit Agreement, we are required to maintain a minimum fixed charge coverage ratio of 1.10x and a cash flow leverage ratio of 3.50x or less for all testing periods throughout the term of the Credit Facilities. As of June 30, 2026, we were in compliance with our financial covenants.

Leases

We have lease arrangements for certain computer, office, printing, and mail inserting equipment as well as office and data center space. As of June 30, 2026, we had fixed lease payments of $413,000 and $5,000 for operating and finance leases, respectively, payable within 12 months.

Taxes

The liability for gross unrecognized tax benefits related to uncertain tax positions was $2.4 million as of June 30, 2026. There were no material changes in our unrecognized tax benefits during the six months ended June 30, 2026.

Stock Repurchase Program

In March 2026, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to $60.0 million of our outstanding common stock through March 31, 2028 (the "2026 Program"). Under this authorization, we may repurchase shares from time to time in the open market, through privately negotiated transactions, and/or other means in compliance with the Securities and Exchange Act of 1934 and the rules and regulations thereunder. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 under the Exchange Act. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares of common stock under this authorization. The timing, manner, price, and amount of any repurchases will be determined by the Company at its discretion, and will depend on a variety of factors, including business, economic and market conditions, prevailing stock prices, corporate and regulatory requirements, and other considerations. The repurchase program may be suspended or discontinued at any time.

During the three months ended June 30, 2026, we repurchased 397,381 shares of our common stock for an aggregate of $7.4 million.

Critical Accounting Estimates

There have been no changes to our critical accounting estimates described in the Annual Report on Form 10-K for the year ended December 31, 2025, that have a material impact on our Condensed Consolidated Financial Statements and the related Notes.