Welcome to the IDEAS Conference. I'm Sandy Martin. I'm one of the Managing Directors for Three Part Advisors. Next up, we've got NRC Health, a Nasdaq-traded company with the ticker NRC. Today we've got Shane Harrison, CFO. He's CFO for a $442 million market cap company, who is a leader in healthcare experience improvement solutions. I'll hand it over to you, Shane. Thanks.
Great. Thanks so much. Appreciate it. Thanks, everybody. Thanks for coming. Good morning. Before I go into the overview, got the legal disclosure. There might be some forward-looking statements. There's definitely some non-GAAP financial measures, which you can get the reconciliations on our standard press releases. All right. Shane Harrison, I'm the CFO of NRC Health.
What do we do? In a nutshell, we are stakeholder experience management and experience improvement providers for the healthcare market. What do I mean by that? To go into a little more detail, we are creating and analyzing data based on feedback from patients, employees of healthcare systems, as well as just healthcare consumers across the country, and I'll go into some more details on those products. On top of that, we're doing workflow solutions too, that utilize that same data.
It's basically adding predictive insights for nurses, for doctors, and even Chief Marketing Officers, CFOs, CEOs, those kind of things, and even their Boards of Directors. Again, once I talk about some of the products, you'll understand what I'm saying. We do this with a subject matter expertise that's unrivaled, really, in the market. We've been at it for 45 years. We went public in 1997, so we've been doing this for a long time. Again, we're focused on that healthcare market. The ultimate mission that we're trying to do here is improve outcomes.
That's twofold. We're trying to improve patient outcomes through better experiences because we believe experiences will improve patient care, or better experiences will improve patient care. Also, we're also trying to improve healthcare systems operations. At the end of the day, we're trying to improve the healthcare systems' margins by providing some of this data. Some of the headlines, starting at the top there, we're 99% recurring revenue, so it's a very predictable business. We're at $152 million of ARR. We call it TRCV, but that's the annualized recurring revenue of the business.
That's up 13%. That's as of March. Healthy margins, 28% with upside, which I'll talk about, and then a big runway. We think we have a TAM here of $5 billion. On the bottom there, I mentioned this, we've been around for 45 years. We've been doing this for a long time, public since 1997. We have presence with 75% of the top 100 health systems and 64% of the top 400. We've got existing relationships. We're processing 25 million pieces of feedback every year from patients and employees.
We're ranked, in this niche that we're in, we're ranked the number one provider, and that's from an external party called KLAS Research that does healthcare IT research. We're intent on improving what we believe is a challenged healthcare market. I'm sure a lot of you know or have experienced the healthcare space and probably not seen it be very efficient here in the U.S., but some stats there on the left. You can see 96% of patient complaints relate to customer service. 75% of frequent healthcare consumers are frustrated with the whole process, right?
When you talk to the healthcare administrators, over half of them say patient experience is their number one priority because they know what a good patient experience can do for their brand loyalty, for their operations. We believe that better experiences will drive improved care, like I mentioned, but also improved care and better experiences will also drive efficient operations at the health systems. Ultimately lead to higher brand loyalty. Our value proposition to our customer is a three-pillared, call it construct.
Starting with insights, on this diagram you can see here, that insights is what we're providing understanding, right? We're giving the customer understanding about what they're doing with these people that they're servicing. We're also engaging with the customer. That's my words. We provide white glove service, hand-holding them. Showing them this is what the data's telling you. Here's how you can improve based on our experience as SMEs. Here's what we think you should do to improve your experience for your customers. Lastly, we're enabling. That's the workflow stuff I talked about.
We're telling them, "Here's a tool, software tools, that will help you take action on the data that you're seeing." This slide's about the four. We have four product areas. The core of the business, roughly 60% of our revenues today is in this patient experience bucket. There's a couple of other things we do under experience, like employee experience, which is a fairly new product for us, but very high growth and big opportunity. We also do some reputation management, so think of this as Google star ratings for doctors and hospitals.
We have the tools that help them manage, reply to those comments, just manage their overall footprint on those review sites. We do a care transitions product where you're basically calling and, maybe not calling, but to use a simplified version of either calling or texting people after they left the hospital to check in on them. "How are you doing? How's the medication?" Those kind of things. That, again, that's the core of the business.
We move to the second one here, which is enablement. These are the actioning tools I mentioned, and our main product there today is what we call rounding. If you imagine any healthcare TV show, you see a nurse walking around with a clipboard. Well, we're replacing that clipboard with an iPad that has software in it that is utilizing the data that I've mentioned, that is telling them, "Hey, John Doe in room 205, he was here last month. He said these four things.
You should go ask him about X, Y, or Z." It's, again, leveraging the data and helping the frontline workers, whether it's a doctor or nurse, to better improve, again, at the end of the day, trying to improve experience. Telling them what to do. It's also got AI in it that does the ambient listening. Instead of having to type notes while they're talking to this patient, it's doing it automatically and cleaning up the notes and making it nice and pretty. That's a very high growth area for us right now. It's a newish product. We acquired it a few years ago, but it's doing really well in the market.
Our third bucket is what we call strategic insights. Think of this as, it's the largest syndicated healthcare survey, brand survey in the country. We outsource it. We use survey panels, but we collect 300,000 surveys a year. Again, not specific to a customer, but to just about the entire market. It's really used by Chief Marketing Officers and executive teams to understand how they're doing in their relative market. It can be used for M&A.
If there's a health system that's thinking of buying something in another market, they can use this tool to understand all these thousands of different vectors you can go on the data about providers in that space. Lastly, we have what we call TGI. This is The Governance Institute. Think of it as tools and education for Healthcare Boards. We're enabling Boards to have better governance, because at the end of the day, that's another way you improve experience. All right. We have a few differentiators.
We have some competitors, we think we're differentiated in a few ways. The number one being our platform breadth. Think of it as a virtuous cycle of continuous improvement at a healthcare system. If I start on number one on the top there, that's what I've been talking about. That's where we're collecting data. We're capturing data, whether it's the patient data, the employee data, or the consumer feedback for that last product I just mentioned, Market Insights. We're taking that, and then we're analyzing it. We're processing it, we're giving the insights to the customer, we're benchmarking them based on our knowledge of how things should look when it comes to NPS scores and experience scoring.
Again, one of the big, important things we're doing, we're contextualizing this data, because you can't just throw data at these people. They need context. That's one of our secret sauces as well. Number three, as you're going around the loop, we're engaging with that customer. We're hand-holding them. That's my words. I can't think of a better word than hand-holding. We're helping them understand the trends. "Okay, here's where you stand on the benchmark." Again, the subject matter expertise comes in handy here.
This is where we tell them, "You can do X, Y, or Z to improve this cardiology unit score," or, "This ICU is underperforming for X, Y, or Z." That's where we add a lot of value is, again, hand-holding. You cycle through the hospital, you go to number four there. That's with the enablement part. Again, utilizing that data, giving them tools to use in the workflow, in the front line, nurses, doctors, and leveraging this tech that I've been talking about and this data. Then it realizes ROI. If they're doing this all right, at the end of the day, they're going to get tangible results, whether it's saved hours from nurses, whether it's improved brand loyalty, those kind of things. It's going to cycle through, and then you start the cycle again.
You then capture the data again and see how you're doing, and you're just constantly doing that. That's part of the beauty of the subscription model that we offer. Our other differentiator, I kind of hinted at this, but we've been doing this for 45 years. We defined what's called patient-centered care, and what that is is a framework that really came around in the 1980s, where healthcare moved from just diagnosing and fixing symptoms and addressing symptoms, and moving it towards more of a holistic view of the human.
Through an acquisition that we made way long time ago, the Picker Institute, that's who invented this kind of thing, and it's a standard now. Every healthcare system uses patient-centered care. That's their mindset. We have a very strong thought leadership team, so this is an important part in the healthcare space. We spend a lot of time analyzing trends, analyzing markets, and it's a big part of our selling process, is our thought leadership. Then we have a lot of best practices, benchmarks, all those things, again, with that 45 years of experience, that helps us differentiate.
Then I'd say the third big differentiator for us is just trust, and again, in healthcare, this is very important. Another third-party research firm ranked us number one in our competitive set for the word trust in the surveys that they did. We're a trusted brand. We provide certainty. We provide very strong compliance because we're HITRUST certified. HITRUST is a certification agency that I think it started in healthcare, and I think the HI stands for Health Information Trust, and now it's evolved. Actually, HITRUST is now used across many industries.
We're certified there. Then on the right, you can see a lot of the customer logos that we have. We're very proud of that presence that we've built. All right. I mentioned our opportunity to keep growing here. We see our market as a $5 billion opportunity. We're currently at about $140 million of revenue, a lot of runway here. If I step through how we get to that, with our current existing product set, we think we have about a $700 million opportunity just to cross-sell. One stat to throw out there, 70% of our customers are using one of our seven products.
There is big opportunity to continue to cross-sell. Then on top of that, we have new logo opportunity. We don't service all the healthcare systems. There's thousands of them in the U.S. We still have opportunity there. We think that's another $600 million of opportunity. Then I mentioned this Market Insights product, that survey, that nationwide survey where we get 300,000 surveys a year. We only sell that to health providers, so healthcare systems. We think there's a huge opportunity for both insurers, pharma, biotech.
Anybody who sells anything into the healthcare space would be very interested in this longitudinal decades' worth of data that we have around healthcare markets in the U.S. That's a big opportunity. We size that at about $1.4. Then there's some more on the enablement pillar that I mentioned, where we're doing rounding today. We think there's more things we can do with workflow tools. That's quality, clinical quality, clinical safety. Those are all areas we could either organically evolve into or even possibly acquire into. All right.
This is just a visual of our financial profile, which is a big reason I joined the company nine months ago. I saw this business that I'd never heard of. I wasn't in healthcare, and I was like, "Well, what is this thing?" I started looking at the financials and I was like, "Okay, this is interesting." I tried to visualize it here. If you start on the left with our $140-ish of revenue, you peel off the direct expenses and the SG&A, you get to that EBITDA where, this is as of 2025, we were at a 29% EBITDA margin. You peel off D&A, and you get to operating income. Bottom line, as you work your way all to the right there, you can see that adjusted free cash flow of 21% margin.
I did a comparison there in the bottom right, how we do versus our peers. Our healthcare IT peers, which is a bucket of five or six companies, how we're doing against The Magnificent Seven. We're in line with them and then definitely ahead of the S&P 500. Very good cash conversion from EBITDA or adjusted income down to free cash flow. I don't like adjusting free cash flow, but I did here because we did a pretty meaningful, this was before my time, but we did a pretty meaningful CapEx investment over the 2022- 2025-ish, which was double-digit millions in our sorry, our headquarter build-out. If I strip that out, that's the only thing I'm adjusting for.
I'm not playing a lot of games here with the free cash flow. All right, I mentioned the predictability. On the left there, you can see only 1% of our revenue is non-recurring, and most of that relates to that TGI product that I mentioned. That's basically conference tickets. One of TGI's big products, let's call it, is conferences. Having Board members come to conferences, learn, network, those kind of things, and we sell tickets to that. That's the only, the majority of that 1%. The other thing is, this company had typically been a one-year contract.
Evergreen, okay, you sign a one-year deal. We're moving towards long term. We're almost at half of our contracts are now three years or more. That number keeps going up. We'd like to see it get at, call it 2/3 or even 75% at some point. Again, one of my favorite stats there is on the right. Again, another reason that I decided to join the company is, and I've been in SaaS companies before, I understand pretty deeply how ARR drives revenue. I've never seen a correlation this tight. I'm showing the last six years.
The blue bar is what we started that year with in ARR. We call it TRCV, but it's annual recurring revenue, basically. The orange is what we finished the year at in revenue. You can see within two to three points, it's a great crystal ball for what revenue's going to be. I love that as a CFO. Our TRCV trend has not been good up until recently. What we like to say is we got long COVID as a company. COVID hurt this business, hurt the whole healthcare industry, right? Put it up in flames, basically. It's taken us some time to come back.
We are coming back. You can see these are March, the last four years of ending March TRCV. 13% growth this last year. Why or how? Lot of reasons, but one of them is we got a new sales lead who came in. He was a boomerang. He'd been at the company before, left, came back, kind of revamped the entire sales process with both the front end and the back end, sales ops, all those kind of things. On top of that, we've been investing pretty heavily in the sales team. We have a nice footprint now. We've bucketed into three buckets. We used to have salespeople that had a trench coat with all the tools and all the products. Now we have three groups.
One group is focused on the core, which is that experience product. We have a group that's focused on that Market Insights, a nationwide survey product, and then we have a team that's focused on TGI itself. The reason of that is because there's different buyers for those three products. They're all obviously healthcare buyers, but there's Chief Marketing Officer is the main buyer for the Market Insights. TGI is either a CEO or a Chairman of the Board or even a Chief Legal Officer. The experience core is largely Chief Nursing Officers or Chief Experience Officers. That's been playing out very well. That's another part of it. Another big one is just product enhancements.
I think some of our products got stale, we did some tech debt work that's starting to show through. That's playing out. Good growth so far. Longer term, we think we continue to grow, right? We're going to continue to go after this go-to-market strategy that I'd mentioned. We're going to keep investing in our team there. I mentioned the cross-sell opportunities, particularly with that rounding tool. It's still very early days. It's our fastest growing product. One of our fastest growing products. Small base, but huge opportunity to cross-sell that into the core.
We're continuing to innovate in product. We're doing lots with AI, particularly on the rounding tool. I mentioned the cross-selling. Our gross retention rate has room to improve. We've been improving the last couple of quarters, but I still think we can do better there. There's the new logo opportunity that I mentioned on the TAM slide. We're excited about, obviously the near term at that double digit, but longer term, continuing to keep the company growing. Along with the revenue coming down those last few years, I'm showing here what the EBITDA margin did. We used to be in the high- 30s.
It's come down with the top line coming down. We've settled it out at the 29%-ish over the last couple of years. With the growth that we see on the revenue that we expect now, that's going to come up. We have very good incremental margins on growth, call it 50% incremental margins. We're going to obviously reinvest into the business, and I'm including our reinvestment in that 50%. In other words, we're taking some cost as we grow. We're going to take that and reinvest in the business. We still think we can dish down to the bottom a 50%-ish incremental margin. Things that we're doing to make sure that happens is disciplined hiring.
We're putting more structure around some of the back office stuff. A good example is, I came into this role, there was no budget at the company. The company did not run with a budget. I've added that. Things like that. Things that are kind of nuts and bolts stuff that I think will help overall, just help us have better visibility in the business. I've mentioned this a lot, the free cash flow, it's very interesting to me how well we're doing there.
We're very consistently over 100% conversion on adjusted net income to free cash flow. I'm a free cash flow per share guy, so I'm very focused on, I'll talk a little bit about buybacks in a second, but I think my core metric for just being a CFO, and especially at this company, is free cash flow per share. Speaking of that, what are we doing with all this cash that we're generating? A little visual here that kind of shows the last four-ish years.
If I start at the top, I focus on the balance sheet. What's our debt situation look like? We're currently about 2x levered, which is, in my view, very manageable. It's sufficient to allow us to do the things we need to do. If there's an acquisition that comes down the pike, we have the capability to do that. With that in mind, I then think about, okay, priority number one is reinvest in the business. You can see here we're investing about 8% of our revenue into product and technology. That's probably going to go up a little bit in the near term with AI and some of the stuff we're working on there. Won't affect margin net net. As far as what we're spending our money on, we're going to skew a little higher on R&D.
We also spend CapEx, most of that 3% is cap software. Again, we're developing a lot of software, so we capitalize some of that. Those are our priority. Number one priority is, okay, what are we doing with strategy in the business? Once we get from there, we're then thinking about, okay, shareholder returns, right? What's the best way to return capital to shareholders? We have a dividend. Currently, our yield's a little over 3%, we have a very healthy dividend. From there, I run an intrinsic value model. I have a view, and my boss, the CEO, we meet, call it, every other week to talk about where are we trading, what's the model saying?
I'm updating that model all the time for things that I'm learning throughout this budget process and throughout whatever new product introduction ideas that we have. These high ROI initiatives that we're constantly getting thrown at us by the product team, right? We're always tweaking and kind of rejiggering that intrinsic value model. You can see over the years, though, we've spent over $100 million on just share buybacks.
Last slide, just to round it out. Four kind of things that I think this is a very compelling story. We're vertically focused. That's an important aspect to me as I think about risks from AI and those kind of things. Vertically focused in a physical industry, which is healthcare, right? We think that that's a very good space to be. I mentioned the decades and decades of experience. That's very compelling. Frankly, a lot of the ways we win and when we win deals is the longevity of our customer success people.
Because again, the white glove service that we provide, that's baked into the pricing. We don't charge extra. It's all baked into the way we price our contracts, which is very well received by our customers. We don't nickel and dime. So that all feeds into this kind of SME concept that I talked about. I mentioned the presence. We've got 75% of the top 100 and 64% of the top 400. These products and these insights and the solutions we're providing tangible ROI. They're saving hours at the frontline. They're improving customer loyalty.
They're doing all these things that you can track, NPS scores, these kind of things. So we're very good at showing case studies. If you do X, Y, or Z, here's what you're going to do, and here's what this customer did when they did that. We've got this differentiated business model again, with a regulatory angle that I didn't mention. So when customers are doing these surveys, the scores that they can do get back to the CMS, which is the Centers for Medicaid and Medicare. They get rebates based on how good their scores are.
So there's a regulatory element here that is important. It's really hard to replicate. These are very complex. It's called CAHPS. It's a very complex regulatory framework that we think, again, we basically helped create it back in the 1980s, that we're the SMEs in that angle. I mentioned the opportunity to cross-sell. We've got huge data assets that I still believe are not monetized fully yet. There's the AI stuff. I left that slide out for time, but a bigger version of this deck is on our IR site. You can see what we're doing with AI in there, but it's very compelling. Again, it feeds right into hard, tangible results for a customer that we can show them.
If you implement ambient listening into your rounding, you're going to get 60 times better fidelity on your notes and all kinds of stats that we have on that. I mentioned the profile, very predictable, very strong margins, which I think as we inflect back to growth, that we can push that back down into margin improvement. We've got that great cash flow conversion, and frankly, at the end of the day, we're a rule of 40.
Even though we don't consider ourselves a SaaS company, we do fit that profile with that rule of 40 kind of look. Wrapping it up with diversified capital allocation, again, that's my focus. I've got my eye on the debt, the balance sheet, making sure we're investing in the right things. Then, again, if the market says it's a good buy, I'm going to be buying shares. That's how we look at it. That's all I got. If there's any questions, we got a few minutes to Yeah.
You touched briefly on competitors. I'm new to the story, so forgive my potential ignorance. Are your competitors market research firms, or are they consulting firms, or all of the above? The second part is, who do you view as your most formidable competitor?
Sure. The question is walk through the competitive set. It is different by the product categories that I mentioned. If I stay in the core, the experience product, there's a handful, call it four or five bigger competitors that look a lot like us. They have software tools, and they're going out and doing surveys. Qualtrics is one of them. Press Ganey. Qualtrics is more horizontal, so they have solutions for employee experience across all industries, right? They do it for Delta Air Lines and Hilton Hotels and those kind of things.
We just do it for healthcare. The other big competitor is Press Ganey, who's like us. They focus on experience for healthcare. They do a lot of other things as well, consulting and things like that, but they compete with us in our niche. Qualtrics just bought Press Ganey. That's how they feel about the healthcare market. That just happened a few weeks ago. We'll see how that pans out. There's some cats and dogs. There's a company called PRC that looks a lot like us, but a lot smaller. There are some consulting firms that will just do bespoke.
Like if we have an RFP, sometimes we see RFPs where a customer sort of built their own using a consulting firm that does the surveys for them. Obviously we have a pitch that says that you shouldn't do that. You get to the Market Insights. That survey where you're studying the whole United States, if you call it a competitor, it's basically consulting firms that would go do that for X, Y, or Z customer that's asking for it. TGI kind of stands on its own. There's general board best practice, call it institutes that are out there, but TGI's the only one that's focused on just healthcare. That one's pretty unique, I believe. Yeah.
Where does the company, in terms of the Salesforce revamp that you talked about?
Yeah, the question's about where are you in the process of revamping that Salesforce? It's never done, in my view. I'd say the structural changes, the team hiring of the back office, like sales ops, we've got a great sales ops team. I'd say it's 80% baked. Now it's just tweaking, whether it's tweaking commissions, tweaking regions, tweaking coverages, moving people around. Maybe this person should be in the TGI team, stuff like that. I think that's on the edges. I think the meat of it is largely baked. Yep.
The large customer that you're currently, obviously you just won some big new deal and that's being integrated, that's basically being implemented right now. Where are you with that?
Yeah. The follow-up there is we won a unnamed, we can't name the customer, but we won a fairly sizable on the patient experience and on the rounding product. We won that in March. Huge healthcare system. It's requiring us to invest ahead of time because they need a lot of customer success help. Part of the reason our margin for Q1 and what we said on the call, Q2 will probably be similar to Q1, is because we're kind of hiring ahead of the revenue.
Revenue hasn't started yet. We expect revenue to start in July. Right now we get weekly, believe me, all eyes are on this thing. We get weekly updates. Things are looking great. It looks really good. I think we've hired most of who we need, and they're doing their thing. They're implementing, getting the data ready, getting everything set up. Yeah, it all looks great so far. Okay. Well, thanks so much for your time. Appreciate it.