Q2 2026 Cardiff Lexington Corp Earnings Call

August 12, 2026

Speaker #1: Good morning, everyone, and thank you for participating in today's conference call to discuss Cardiff Lexington's financial results for the second quarter ended June 30, 2026.

Operator: Good morning, everyone, and thank you for participating in today's conference call to discuss Cardiff Lexington's financial results for Q2 ended 30 June 2026. At this time, all participants are on a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Walter Frank of IMS Investor Relations. Sir, please go ahead.

Speaker #1: At this time, all participants are on the listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.

Speaker #1: And as a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Walter Frank of IMS Investor Relations.

Speaker #1: Sir, please go ahead.

Speaker #2: Thank you, operator. I would like to welcome everybody to the call. Hosting the call today are Cardiff Lexington’s CEO, Alex Cunningham, and CFO, Matt Schaefer.

Walter Frank: Thank you, operator. I would like to welcome everybody to the call. Hosting the call today are Cardiff Lexington's CEO, Alex Cunningham, and CFO, Matt Shafer. I would like to take a moment to read the safe harbor statement. This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements and terms such as anticipate, expect, intend, may, will, should, or other comparable terms, involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Those statements include statements regarding the intent, belief, or current expectations of Cardiff Lexington and members of its management, as well as the assumptions on which such statements are based.

Speaker #2: I would like to take a moment to read the Safe Harbor statement. This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.

Speaker #2: These forward-looking statements, and terms such as anticipate, expect, intend, may, will, should, or other comparable terms, involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future.

Speaker #2: Those statements include statements regarding the intent, belief, or current expectations of Cardiff Lexington and members of its management, as well as the assumptions on which such statements are based.

Speaker #2: Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties including those described in Cardiff Lexington's periodic reports filed with the SEC, and that actual results may differ materially from those contemplated by such forward-looking statements.

Walter Frank: Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in Cardiff Lexington's periodic reports filed with the SEC, and that actual results may differ materially from those contemplated by such forward-looking statements. Except as required by federal securities law, Cardiff Lexington undertakes no obligation to update or revise forward-looking statements to reflect changed conditions. I would now like to turn the call over to the CEO of Cardiff Lexington, Alex Cunningham.

Speaker #2: Except as required by federal securities law, Cardiff Lexington undertakes no obligation to update or revise forward-looking statements to reflect changed conditions. I would now like to turn the call over to the CEO of Cardiff Lexington, Alex Cunningham.

Speaker #3: Thanks, Walter. Good morning, and thank you for joining our conference call today. To discuss our second quarter 2026 results. I will start by providing an overview of our performance and strategy which will focus more on year-to-date progress before turning the call over to Matt Schaefer, our Chief Financial Officer, for a deeper dive into our financial results in the second quarter.

Alex Cunningham: Thanks, Walter. Good morning, and thank you for joining our conference call today to discuss our Q2 2026 results. I will start by providing an overview of our performance and strategy, which will focus more on year-to-date progress before turning the call over to Matt Shafer, our Chief Financial Officer, for a deeper dive into our financial results in the Q2. We will then open the call for a brief Q&A. The H1 of 2026 is summarized by continued execution of our long-term strategy to establish Nova Ortho and Spine as a leading healthcare network and provide best-in-class care to a severely underserved patient population. On the operational front, we announced our 12th Nova Ortho and Spine location with the addition of privileges at Southeastern Surgery Center in Tallahassee, Florida.

Speaker #3: We will then open the call for a brief Q&A. The first half of 2026 is summarized by continued execution of our long-term strategy to establish Nova Ortho & Spine as a leading healthcare network and to provide best-in-class care to a severely underserved patient population.

Speaker #3: On the operational front, we announced our 12th Nova Ortho & Spine location with the addition of privileges at Southeastern Surgery Center in Tallahassee, Florida.

Speaker #3: As the capital city of Florida, Tallahassee represents a strategic metropolitan location with high patient volume and visibility that aligns perfectly with our long-term growth strategy and enhances our ability to provide leading medical care.

Alex Cunningham: As the capital city of Florida, Tallahassee represents a strategic metropolitan location with high patient volume and visibility that aligns perfectly with our long-term growth strategy and enhances our ability to provide leading medical care. We also announced a new location in Stuart, Florida, which allows us to tap into the healthy demand that we are seeing from Florida's Treasure Coast, which maintains one of Florida's highest concentrations of residents age 55 and older, a demographic frequently requiring orthopedic, spine, pain management, and mobility-related healthcare services. We also continue to strengthen our team of leading doctors, nurses, and healthcare operators who are the backbone of the services we provide. While we executed well, the H1 of the year was not without its challenges. Revenue decreased from last year, primarily related to fewer billed surgical procedures, as well as lower implicit realization rates on patient case claim settlements.

Speaker #3: We also announced a new location in Stewart, Florida, which allows us to tap into the healthy demand that we're seeing from Florida's Treasure Coast, which maintains one of Florida's highest concentrations of residents age 55 and older.

Speaker #3: A demographic frequently management, and mobility-related healthcare services. We also continue to strengthen our team of leading doctors, nurses, and healthcare operators who are the backbone of the services we provide.

Speaker #3: While we executed well, the first half of the year was not without its challenges. Revenue decreased from last year, primarily related to fewer billed surgical procedures, as well as lower implicit realization rates on patient case claim settlements.

Speaker #3: Despite this, our gross margins remained healthy at 57% for the year to date and our non-GAAP adjusted EBITDA was a relatively small loss reflecting the resilience of our business model.

Alex Cunningham: Despite this, our gross margins remained healthy at 57% for the year to date, and our non-GAAP adjusted EBITDA was a relatively small loss, reflecting the resilience of our business model. Demand is very strong, and we are in a very attractive market. That said, working capital constraints have impacted our ability to go out and take advantage of the many opportunities that we are seeing in the market. A top priority remains reducing our cost of capital to support our growth. We are well-positioned with strong brand recognition in the markets that we currently serve, and we are committed to the continued execution of our long-term strategy, providing the best care available to our patients across our expanding network of Nova Ortho and Spine locations.

Speaker #3: Demand is very strong, and we are in a very attractive market. That said, working capital constraints have impacted our ability to go out and take advantage of the many opportunities that we're seeing in the market.

Speaker #3: A top priority remains reducing our cost of capital to support our growth. We are well positioned with strong brand recognition in the markets that we currently serve, and we're committed to the continued execution of our long-term strategy—providing the best care available to our patients across our expanding network of Nova Ortho & Spine locations.

Speaker #3: With that, I'll now hand the call over to our Chief Financial Officer, Matt Schaefer, to take a deeper dive into our financial results for the second quarter.

Alex Cunningham: With that, I will now hand the call over to our Chief Financial Officer, Matt Shafer, to take a deeper dive into our financial results for the second quarter. Matt?

Speaker #3: Matt?

Speaker #4: Thank you, Alex. And good morning, everyone. Thank you for joining us today. Turning to slide 4. Total revenue for the second quarter of 2026 was $2.2 million compared with revenue of $2.8 million in the same quarter last year.

Matt Shafer: Thank you, Alex, and good morning, everyone. Thank you for joining us today. Turning to slide 4. Total revenue for the second quarter of 2026 was $2.2 million, compared with revenue of $2.8 million in the same quarter last year. As Alex touched on briefly, the decline in revenue this quarter was primarily related to a lower implicit realization rate on patient case claim settlements in the quarter compared with the first quarter of 2025. Cost of sales was $977,000 in the second quarter of 2026, compared with approximately $1.1 million in the second quarter of 2025. Gross profit in the second quarter of 2026 was $1.2 million, or 54.7% of sales, compared to $1.7 million, or 60.8% of sales, in the second quarter of 2025. Total operating expenses increased to $1.7 million compared with $1.1 million in the second quarter of 2025.

Speaker #4: As Alex touched on briefly, the decline in revenue this quarter was primarily related to a lower implicit realization rate on patient case claim settlements in the quarter compared with the first quarter of 2025.

Speaker #4: Cost of sales was $977,000 in the second quarter of 2026 compared with approximately $1.1 million in the second quarter of 2025. Gross profit in the second quarter of 2026 was $1.2 million or $54.7% of sales compared to $1.7 million or $60.8% of sales in the second quarter of 2025.

Speaker #4: Total operating expenses increased to $1.7 million compared with $1.1 million in the second quarter of 2025. The increase is primarily related to higher share-based compensation in the quarter.

Matt Shafer: The increase is primarily related to increased share-based compensation in the quarter. Selling, general and administrative expenses for the second quarter were $1.4 million, or 63% of revenue, compared with $987,000, or 35.4% of revenue, in the second quarter of 2025. Loss from continuing operations was $545,000 in the second quarter of 2026, compared with income from continuing operations of $610,000 in the second quarter of 2025. Shifting now to our profitability metrics. Net loss in the second quarter of 2026 totaled $2.5 million, compared with a net loss of $1.2 million in the second quarter of 2025.

Speaker #4: Selling, general, and administrative expenses for the second quarter were $1.4 million, or 63% of revenue, compared with $987,000, or 35.4% of revenue, in the second quarter of 2025.

Speaker #4: Loss from continuing operations was $545,000 in the second quarter of 2026, compared with income from continuing operations of $610,000 in the second quarter of 2025.

Speaker #4: Shifting now to our profitability metrics, net loss in the second quarter of 2026 totaled $2.5 million, compared with a net loss of $1.2 million in the second quarter of 2025.

Speaker #4: Included in net loss in the second quarter of 2026 was interest expense of $2.1 million, compared with interest expense of $1.9 million in the second quarter of 2025.

Matt Shafer: Included in net loss in Q2 2026 was interest expense of $2.1 million, compared with interest expense of $1.9 million in Q2 2025, which, as Alex alluded to and explained last quarter, is a result of the higher cost financing structures that we've used to fund our business as we continue to explore opportunities to increase our working capital. On a non-GAAP basis, we recognized adjusted EBITDA loss, which excludes interest expense, of $177,000 in Q2 2026, compared with adjusted EBITDA of $708,000 in Q2 2025. A detailed reconciliation of adjusted EBITDA to net income is provided in the press release issued earlier today. Moving now to the balance sheet. Our total assets as of 30 June 2026, were $30.7 million, compared to $29.1 million at 31 December 2025.

Speaker #4: Which, as Alex alluded to and explained last quarter, is a result of the higher-cost financing structures that we've used to fund our business as we continue to explore opportunities to increase our working capital.

Speaker #4: On a non-GAAP basis, we recognized an adjusted EBITDA loss, which excludes interest expense, of $177,000 in the second quarter of 2026, compared with adjusted EBITDA of $708,000 in the second quarter of 2025.

Speaker #4: A detailed reconciliation of adjusted EBITDA to net income is provided in the press release issued earlier today. Moving now to the balance sheet. Our total assets as of June 30th, 2026 were $30.7 million compared to $29.1 million at December 31, 2025.

Speaker #4: Current assets as of June 30, 2026, included $218,000 in cash and $23.7 million of net accounts receivable. Current assets at December 31, 2025, included $319,000 in cash and $22.1 million of net accounts receivable.

Matt Shafer: Current assets as of 30 June 2026, included $218,000 in cash and $23.7 million of net accounts receivable. While current assets at 31 December 2025, included $319,000 of cash and $22.1 million of net accounts receivable. Total liabilities as of 30 June 2026, were $27.1 million compared to $26 million at 31 December 2025. With that, I will now turn the call back over to Alex.

Speaker #4: Total liabilities as of June 30, 2026, were $27.1 million, compared to $26 million at December 31, 2025. With that, I will now turn the call back over to Alex.

Speaker #3: Thanks, Matt. We remain confident that we’re fulfilling a critical healthcare need in a highly attractive geographic market, and we see this as a strong opportunity for continued growth.

Alex Cunningham: Thanks, Matt.

Alex Cunningham: Thanks, Matt. We remain confident that we're fulfilling a critical healthcare need in a highly attractive geographic market, and we see this as a strong opportunity for continued growth. Over the last several years, we've proven that our model can deliver high returns on invested capital. An enhanced access to working capital will provide us with the flexibility to pursue the many opportunities available to us in this exciting market. Looking ahead, patient volume is increasing and our focus remains on debt restructure and working capital, returning our business to historical levels of performance while driving long-term sustained value for our shareholders. Operator, at this time, you can open the lines for questions and answers.

Alex Cunningham: We remain confident that we're fulfilling a critical healthcare need in a highly attractive geographic market, and we see this as a strong opportunity for continued growth. Over the last several years, we've proven that our model can deliver high returns on invested capital. An enhanced access to working capital will provide us with the flexibility to pursue the many opportunities available to us in this exciting market. Looking ahead, patient volume is increasing and our focus remains on debt restructure and working capital, returning our business to historical levels of performance while driving long-term sustained value for our shareholders. Operator, at this time, you can open the lines for questions and answers.

Speaker #3: Over the last several years, we've proven that our model can deliver high returns on invested capital. Enhanced access to working capital will provide us with the flexibility to pursue the many opportunities available to us in this exciting market.

Speaker #3: Looking ahead, patient volume is increasing, and our focus remains on debt restructuring and working capital, returning our business to historical levels of performance while driving long-term, sustained value for our shareholders.

Speaker #3: Operator, at this time you can open the lines for questions and answers.

Speaker #5: Thank you. Ladies and gentlemen, at this time we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, at this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is star 1 if you have any questions or comments. Thank you. Our first question is coming from Andrea Grieco with Stewart Capital. Your line is live.

Speaker #5: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #5: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is *star 1*.

Speaker #5: If you have any questions or comments. Thank you. Our first question is coming from Andrea Greco with Stewart Capital. Your line is live.

Speaker #6: Good morning. Thank you for taking my questions. First, what was the realization rate on claim settlements this quarter, and how does that compare to last year?

Andrea Grieco: Good morning. Thank you for taking my questions. First, what was the realization rate on claim settlements this quarter, and how does that compare to last year?

Speaker #2: Hey, Andrea. Thank you very much for the question, appreciate it. This is Matt. Yeah, our claim settlement rate realization rate this past quarter, for the full quarter, was 41%, and that's 41% as compared to 43% last year.

Matt Shafer: Hey, Andrea. Thank you very much for the question. Appreciate it. This is Matt. Our claim settlement rate, realization rate this past quarter, for the full quarter, it was 41%, and that's 41% as compared to 43% last year. This year, we had settled some patient case claims sooner in the process than we typically have. Last quarter, sequentially, our rate went from the 43% down to the 41%, so it was almost a blended 42% during that quarter sequentially.

Speaker #2: This year, we had settled some patient case claims sooner in the process than we typically have. Last quarter, sequentially, our rate went from 43% down to 41%.

Speaker #2: So, it was almost a blended 42% during that quarter, sequentially.

Speaker #6: All right, thank you. And my understanding is that an increase in professional fees in the quarter was a main driver of the SG&A increase.

Andrea Grieco: All right. Thank you. My understanding is that an increase in professional fees in the quarter was a main driver to the SGA increase. Do you anticipate this level of professional fees to continue?

Speaker #6: Do you anticipate this level of professional fees to continue?

Speaker #2: Yeah, great question. There are a lot of different costs that go into our SG&A. But mainly what sticks out—and you're right, this quarter—is the professional fees, mainly consulting costs, accounting costs, and some legal fees. Those are primarily associated with different transactions that we're doing right now with regards to M&A and our uplisting, which Alex and I have previously talked about in the past two conference calls.

Matt Shafer: Yeah. Great question. There's a lot of different costs that go into our SGA, but mainly what sticks out, you're right, this quarter is the professional fees, mainly consulting costs, accounting costs, some legal fees, and those are primarily associated with different transactions that we're doing right now with regards to M&A and our up-listing that Alex and I have previously talked about in the past two conference calls. We expect that to moderate a little bit, and then level off as we enter into those transactions in the coming months.

Speaker #2: We expect that to moderate a little bit, and then level off as we enter into those transactions in the coming months.

Speaker #6: All right. Thank you. That was very helpful. That's all I have for now.

Andrea Grieco: All right. Thank you. That was very helpful. That's all I have for now.

Speaker #2: Great. Thanks for the questions, Andrea.

Matt Shafer: Great. Thanks for the questions, Andrea.

Speaker #5: Thank you. At this time, I would like to turn the call back over to Mr. Schaefer for any closing remarks he may have.

Operator: Thank you. At this time, I would like to turn the call back over to Mr. Shafer for any closing remarks he may have.

Speaker #2: Thank you, operator. And thank you, everyone, for joining us today. We look forward to speaking with you again when we discuss the results of our third quarter of fiscal 2026 in November.

Matt Shafer: Thank you, operator, and thank you everyone for joining us today. We look forward to speaking with you again when we discuss the results of our Q3 of fiscal 2026 in November. Thank you.

Speaker #2: Thank you.

Operator: Thank you. Ladies and gentlemen, this concludes today's call. You may disconnect your lines at this time, and we thank you for your participation.