CDIX Q1 2026 Earnings Call
Operator (AI Assigned): Good morning, everyone, and thank you for participating in today's conference call to discuss Cardiff Lexington's financial results for the Q1 ended 31 March 2026. At this time, all participants are in a listen-only mode. A Q&A session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to John Nesbett and Walter Frank of IMS Investor Relations. Please go ahead.
Walter Frank (Senior Account Executive): Thank you, operator. I would like to welcome everybody to the call today. Hosting the call are Cardiff Lexington CEO, Alex Cunningham, and CFO, Matthew 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.
Walter Frank (Senior Account Executive): 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.
Alex Cunningham (CEO and Chairman of the Board): Thank you, Walter. Good morning, everyone, and thank you for joining our conference call today to discuss our Q1 2026 results. I will start by providing an overview of our performance, progress, and strategy before turning the call over to Matthew Shafer, our Chief Financial Officer, for a deeper dive into our financial results. We will open the call for a brief Q&A. Throughout the Q1, we continued to expand and strengthen our clinical and operational teams across our 11 Nova Ortho and Spine locations to support patient demand, best-in-class orthopedic medical care, and exceptional patient outcomes with a focus on higher value surgical procedures. While revenues were below the first quarter last year, we were able to achieve positive adjusted EBITDA for the quarter.
Alex Cunningham (CEO and Chairman of the Board): We remain very confident in our long-term growth strategy and ability to drive improved performance as we look to scale the business and capitalize on the attractive opportunities and growth market before us. During the quarter, we upgraded to the OTCQX Best Market, which is the highest level of the OTC markets. This upgrade represents a key milestone for our business and emphasizes our focus on investor visibility, strong financial controls, and corporate governance. These items are foundational to our broader strategy to ultimately uplift to a US exchange and increase our access to working capital. As it stands, we are currently operating at a fraction of our total capacity, and in some cases, we are even having to delay treatment or turn patients away.
Alex Cunningham (CEO and Chairman of the Board): Demand is strong, with enhanced access to working capital, we will be able to support increased patient volume and procedural throughput without relying on higher cost financing structures that have impacted our bottom line for several quarters now, despite consistent revenues and profitability on a non-GAAP basis. Our network of Nova Ortho Spine locations remain strong. With presences in key population centers throughout the state, we can effectively and efficiently provide the highest standard of medical care to our patients, who represent a severely underserved population of the healthcare market. In addition to the markets we currently serve, we're receiving considerable interest from additional locations and communities throughout Florida, Georgia, and further up the broader Mid-Atlantic and Southeast US along the I-75 corridor from Florida all the way to Michigan, which has been very encouraging.
Alex Cunningham (CEO and Chairman of the Board): While I can't go into too much detail on this call, I'm pleased to say that we're currently in the process of opening a location in a new and exciting market, and we'll provide an update soon on this as new details become available. Before turning the call over to Matt, I wanted to provide a brief overview of our M&A, which continues to be a key component of our overall strategy. As many of you are already aware, we have three synergistic pillars that support our M&A growth strategy. The first is to target businesses with strong core cash flows that we can acquire, optimize, and integrate into our existing businesses. These can include physician practices with strong existing cash flows or prospective future cash flows that will help drive core reoccurring revenue for our business.
Alex Cunningham (CEO and Chairman of the Board): The second is to acquire assets that are accretive to our current model and expand our geographic footprint through the acquisition of real estate, including ambulatory surgery centers and orthopedic clinics. The third pillar is focused on driving long-term sustainable growth and value by acquiring and managing the accounts receivable balances of personal injury practices. In short, our goal is to accelerate our organic results and growth through proactive M&A that will be accretive to our business. While we want to be aggressive, we are also approaching M&A opportunities strategically to make sure that these acquisitions can be integrated efficiently and provide meaningful long-term value for our shareholders. With that, I will now hand the call over to our Chief Financial Officer, Matthew Shafer, to take a deeper dive into our financial results for Q1.
Matthew Shafer (CFO): Thank you, Alex. Good morning, everyone. Thank you for joining us today. Turning to slide 6. Total revenue for Q1 2026 was $2.2 million, compared with revenue of $2.9 million in the same quarter last year. The decline was primarily related to a decrease in surgical procedures in the quarter compared to Q1 2025. Cost of sales was $904,000 in Q1 2026, compared with approximately $1.1 million in Q1 2025. Gross profit in Q1 2026 was $1.3 million or 59.3% of sales, compared to $1.8 million or 63.1% of sales in Q1 2025.
Matthew Shafer (CFO): Total operating expenses increased to $1.8 million, compared with $1.3 million in Q1 2025. The increase is primarily related to share-based compensation of $664,000 in Q1 2026, compared to no share-based compensation in Q1 2025. Selling, general, and administrative expenses for Q1 were $1.2 million or 52.4% of revenue, compared with $1.3 million or 43.9% of revenue in Q1 2025. Loss from continuing operations was $511,000 in Q1 2026, compared with income from continuing operations of $544,000 in Q1 2025. Shifting now to our profitability metrics.
Matthew Shafer (CFO): Net loss in Q1 2026 totaled $3.1 million, compared with a net loss of $451,000 in Q1 2025. Included in the net loss in Q1 2026 was interest expense of $1.9 million, compared with interest expense of $1 million in Q1 2025, which, as Alex had mentioned, is related to the higher cost financing structures that we've used to fund our business in lieu of working capital. On a non-GAAP basis, we recognized adjusted EBITDA, which excludes interest expense of $164,000 in Q1 2026, compared with adjusted EBITDA of $546,000 in Q1 2025. A detailed reconciliation of adjusted EBITDA to net income is provided in the press release issued earlier today.
Matthew Shafer (CFO): Moving now to the balance sheet. Our total assets as of 31 March 2026 were $30.3 million, compared to $29.1 million at 31 December 2025. Current assets as of 31 March 2026 included $684,000 in cash and $22.9 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 31 March 2026 were $24.6 million compared to $26 million at 31 December 2025. With that, I will now turn the call back over to Alex.
Alex Cunningham (CEO and Chairman of the Board): Thank you, Matt. We have a proven business model that supports our strategy and goals to provide long-term sustainable value creation for our shareholders. We've driven consistent results and profitability with our current model despite diverse economic markets and conditions, and we have a proven track record of driving strong returns on invested capital, demonstrating efficient capital management and the strength of our capital allocation strategy. Looking ahead, our focus is on investing in growth to continue pursuing the market opportunity ahead of us. We are ideally positioned in a healthcare market with high barriers to entry and a robust patient referral network to capture additional market share. Our next phase of growth is to enhance our access to working capital to maximize our operating capacity and support our ongoing organic growth and M&A strategy to unlock long-term growth and value for our shareholders.
Alex Cunningham (CEO and Chairman of the Board): Thank you everyone for joining us today and for your ongoing support of Cardiff Lexington. We can now open the call for questions.
Operator (AI Assigned): Your first question for today is from Jennifer Wolfert with Comstock Hill Partners. Jennifer, your line is live.
[Analyst] (Analyst): Sorry about that. I was on mute. Thanks for taking the question. I had a question around geographic expansion. I mean, I know, you know, primarily we're in Florida right now and with a location in Georgia, you know, which I know are, you know, present a lot of opportunity. You know, what are you thinking long term in terms of whether you'll stay and focus on these current markets or whether we might see you enter some new areas over time?
Alex Cunningham (CEO and Chairman of the Board): Hi, Jennifer. This is Alex Cunningham. Thank you for your question. It's very relevant to our overall goal as we grow the organization strategically. There are 18 states that we have identified that have a combination of favorable dynamics for our business model. 12 of those states are in the Eastern and Central time zones, where we may consider acquisitions that are practical for our overall management. 7 of those states sit along the I-75 corridor from Florida to Michigan. We're already in Georgia and Florida, and so that leaves Tennessee, Kentucky, Indiana, up towards Michigan. The primary focus of our strategy is to expand into those underserved populations along the I-75 corridor, and we're currently in discussions with several potential mergers and acquisitions targets within that identified geographic market.
Alex Cunningham (CEO and Chairman of the Board): We'll step outside of that market for the right opportunity, but we will stay for the most part east of the Mississippi.
[Analyst] (Analyst): Great. Thank you. Thanks for that background.
Operator (AI Assigned): We have reached the end of the question and answer session. I will now turn the floor over to Alex for closing remarks.
Alex Cunningham (CEO and Chairman of the Board): Thank you very much. I appreciate everyone attending. I know that we continue our working capital challenges that sometimes internally and externally divert management from its overall goal. We have a proven business model where we have effectively deployed capital at a high rate of return over time, and we expect to continue to do that. We appreciate our shareholders that support us, and we look forward to talking to you at the end of the next quarter. Have a great day.
Operator (AI Assigned): This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
