Cardiff Lexingtn Corp

Good morning, everyone, and thank you for participating in today's conference call to discuss Cardiff Lexington's financial results for the fourth quarter and year ended December 31st, 2025. At this time, all participants are in a listen only mode. 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 is being recorded. I would now like to turn the call over to John Nesbitt and Walter Frank of IMS Investor Relations. Please go ahead.

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. 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. 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, Carter-Flexington 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 Carter-Flexington, Alex Cunningham.

Thank you, Walter. Good morning, and thank you for joining our conference call today to discuss our fourth quarter and full year 2025 results. I will start by providing an overview of our performance, progress, and strategy before turning the call over to Matt Schaefer, our Chief Financial Officer, for a deeper dive into our financial results. We will then open the call for a brief Q&A. 2025 was a year of growth and strategic execution as we continued to expand our footprint and make meaningful progress on our long-term goals. As of year end, our subsidiary, Nova Ortho and Spine, is now operating in 11 locations throughout Florida and Georgia. Most recently, we began servicing patients at Doctors Memorial Hospital in Perry, Florida, demonstrating our ongoing commitment to providing best-in-class healthcare to severely underserved and rural patient populations, in addition to the metropolitan areas where we are seeing strong demand for our services. Revenue for the full year was strong at $11.5 million, supporting our net operating margin of 9.5% and an adjusted EBITDA of $1.8 million. Our 2025 revenue represents an increase of 40% compared to full year 2024, driven by increased patient volume and a favorable shift toward more complex, higher value surgical procedures across our NOVA ortho and spine locations. coupled with disciplined expense management, these results supporting strong adjusted EBITDA profitability for the full year. Patient volume continued to increase throughout the year as we expanded our footprint and capabilities. As of December 31, 2025, we see between 270 and 375 patients per month on average, across all our locations, up from 250 to 325 patients per month a year ago, demonstrating strong demand for our services in our existing markets. As we continue to treat more and more patients across an expanding network of locations, we are also adding to our industry-leading team to support our growth. Through 2025, we've welcomed on board key clinical and operational technologies talent across our footprint. Finally, as many of you are already aware, we're taking meaningful steps to actively position Cardiff Lexington for an up listing to a major U.S. stock exchange. This is the key next step in our growth strategy, and it is our expectation that an up listing to a major U.S. stock exchange will enhance our visibility, liquidity, and access to capital and in turn support significantly enhanced long-term value for our shareholders. Our 2025 results are encouraging, and we think it makes sense to view them in the context of the last four years to more accurately show you where we've been and where we believe we're headed. As you can see from the graph on slide four, revenue has more than doubled since 2021, when we reported 5.4 million in revenue for the full year. To date, this growth has largely been supported by the organic growth of Nova Ortho and Spine, which continues to see strong demand in the diverse geographic and socioeconomic markets that we serve throughout Florida and Georgia. We've shown our ability to drive growth and profitability in diverse markets and economic conditions. We have also been able to do this despite having limited access to capital. Given the opportunity in front of us, we have chosen to strategically invest in the business utilizing higher cost capital, which we believe will drive long-term returns for the business. But the increased interest expense has impacted our 2025 gap profitability. As I mentioned in my executive summary, our next step is to uplist Cardiff Lexington's common stock on a major U.S. stock exchange and simultaneously leverage our enhanced access to capital to properly fund the growth of our business. We believe that with the necessary working capital to support enhanced operating activity, combined with our expanding NOVA ortho and spine footprint and our ongoing M&A efforts that remain a key pillar of our strategy, we are well positioned to drive significant growth, value, and profitability for Cardiff Lexington shareholders. At the core of this strategy is a profitable and scalable healthcare platform with a demonstrated ability to drive revenue growth and consistent profitability in orthopedic healthcare, which is statistically one of the fastest growing sectors of healthcare in the United States. Healthcare as an industry is also recession-resistant. People need medical care and services regardless of economic cycles, interest rates, and so on, allowing us to drive results regardless of macro environments that could severely impact businesses in less resilient industries. Another key component of our model and a differentiator for Cardiff-Lexington in the healthcare market is that the majority of our patients typically do not have access to health insurance or critical medical care. Therefore, payment is collected through a combination of automotive insurance settlements, general liability carriers, and private payments. Through these alternative forms of payment, we're able to achieve an industry-leading collection rate of over 95% over a gestation period typically lasting between 12 and 24 months. Our market presence in Florida is strong. We are expanding our footprint into Georgia and further up into the broader mid-Atlantic and southeast U.S. along the I-75 corridor from Florida to Michigan, where there is significant demand for our services. Florida, in particular, has the most personal injury claims per capita in the United States, and we're very well diversified among both metropolitan and rural markets to capture what we believe to be a significant revenue opportunity. As always, M&A remains an integral component of our growth. We view our acquisition strategy through the lens of three synergistic pillars. And I'd like to take a moment to reiterate how we evaluate potential targets to ensure that they will be an accretive value to our existing business. First, we target businesses with strong core cash flows. Position practices are a good example. that we can acquire, optimize, and manage with the goal of enhancing operational efficiencies and driving increased recurring revenue. Our second pillar is focused on acquiring assets that are accreted to our current model, such as real estate, which allows us to expand our geographic footprint along the organic growth of our Nova Ortho and Spine network of locations. Our third and final pillar is focused on driving long-term and sustainable profitability for Cardiff Lexington. By acquiring and managing personal injury accounts receivable instead of selling them off, we're capturing valuable additional revenue and drive long-term income and sustained higher margins of profitability for our business. To summarize, we have a profitable and scalable health care program that we expect will grow at an accelerated rate with enhanced access to working capital needed to fund our business. We're an orthopedic health care provider, which is one of the fastest growing sectors of health care in the United States. Our business is resistant to general market fluctuations and shifting economic landscapes, which allows us to effectively service a severely underserved patient population, regardless of micro environments. The industry has inherently high barriers to entry, and the market is highly fragmented, giving us a significant leg up as an established business in the space. And finally, we've proven our ability to drive growth and profitability and efficiently allocate capital resources across our business. The path forward is clear, and we're working diligently to position Cardiff Lexington for this next phase of growth. With that, I will now hand the call over to our Chief Financial Officer, Matt Schaefer, to take a deeper dive into our financial results for the fourth quarter and the full year. Matt?

Thank you, Alex, and good morning, everyone. Thank you for joining us today. Turning to slide 10, total revenue for the fourth quarter of 2025 was $2.8 million compared with revenue of $3.1 million in the same quarter last year. This decline can be attributed to normal variances around the gestation period for collection on our accounts receivables, which typically takes between 12 and 24 months, as well as the timing of the holiday season in 2025, which saw significantly reduced patient volume across our locations over the two-week period around Christmas and New Year's. Full year 2025 revenue was $11.5 million, representing a 40% increase over $8.3 million in gap revenue in full year 2024, which, as Alex mentioned in his remarks, was primarily driven by higher patient volume and a shift to more higher value surgical procedures throughout the year. Excluding the one-time impact of revenue adjustments in 2024, Full year 2025 revenue increased 3.7% compared with non-GAAP adjusted revenue of $11.1 million in 2024. Cost of sales was $1 million for the fourth quarter of 2025, consistent with $1.1 million in the fourth quarter of 2024. For the full year, cost of sales increased to $4.3 million, compared with $3.8 million in 2024, primarily related to the increase in revenue as noted above, offset by corresponding increases in laboratory fees and personnel labor-related fees. Gross profit in the fourth quarter of 2025 was $1.8 million, or 63.5% of sales, compared to 2 million, or 64.8% of sales in the fourth quarter of 2024. For the full year, gross profit increased to 7.2 million, or 62.5% of sales, compared to 4.4 million, or 53.5% of sales in 2024. Selling general and administrative expenses for the fourth quarter were $1.8 million or 66.4% of revenue compared with $1.4 million or 46.2% of revenue in the fourth quarter of 2024. For the full year, SG&A increased to $5.3 million or 46.2% of sales compared to $4.1 million or 49.1% of sales in 2024, representing a slight decrease in SG&A expense as a percentage of revenue in the full year of 2025. Loss from continuing operations was $696,000 in the fourth quarter of 2025 compared with income from continuing operations of $332,000 in the fourth quarter of 2024. For the full year, income from continuing operations increased significantly to $1.1 million compared with an operating loss of $193,000 in the full year of 2024. Shifting to our profitability metrics. Net loss in the fourth quarter of 2025 totaled 2.7 million compared with a net loss of 910,000 in the fourth quarter of 2024. Net loss for the full year totaled 5.5 million compared with a net loss of 3.3 million in 2024. Included in net loss in the fourth quarter of 2025 was interest expense of approximately $2.2 million compared to interest expense of approximately $1.2 million in the prior year period, which contributed to interest expense of $6.8 million for the full year compared with $3 million in 2024. As Alex stated in his remarks earlier, the heightened interest expense in the quarter is related to the increase in initial and incremental fees charged on the number of existing purchases and claims under the line of credit as we continue investing in the growth of our business. Our expectation is that as we enhance our access to working capital, we will reduce the impact of interest expense on our bottom line. On a non-GAAP basis, we recognized adjusted EBITDA loss of 79,000 in the fourth quarter of 2025, compared with adjusted EBITDA of 579,000 in the prior year period. We achieved adjusted EBITDA profitability in the full year with adjusted EBITDA of 1.9 million compared with adjusted EBITDA of 2.1 million in the full year 2024. Notably, adjusted EBITDA does not include interest expense or the change in estimate for the settlement realization rate that impacted our 2024 revenue. A detailed reconciliation of adjusted EBITDA to net income is provided in the press release that was issued earlier today. Moving now to the balance sheet. Our total assets as of December 31st, 2025 were $29.1 million compared to $23.9 million at December 31, 2024. Current assets as of December 31, 2025 included $319,000 in cash and $22.1 million in net accounts receivable, while current assets at December 31, 2024 included $1.2 million of cash and $15.9 million of net accounts receivable. Total liabilities as of December 31, 2025 included were 26 million compared to 16.3 million at December 31, 2024. The increase in total liabilities is primarily related to our line of credit, which at December 31, 2025, had an outstanding balance of 17.2 million compared to 8.6 million at December 31, 2024. With that, I turn the call back over to Alex.

Thank you, Matt. As I said before, the path forward is clear. By strengthening our working capital position, we will be able to significantly increase our operating capacity and grow our business well beyond historical levels. To achieve this, we're targeting an uplisting to a major U.S. exchange, which we expect to drive meaningful improvements in our market visibility, access to capital, and liquidity. We have an established business with a proven track record of driving growth and profitability in a highly fragmented market with significant barriers to entry and a strategy in place to expand our geographic footprint well beyond our existing locations. As we continue to grow both organically and through M&A, Our priority is to allocate capital efficiently and in a way that drives sustainable long-term growth and value for our shareholders. With that, we can now open the call for questions.

Certainly. At this time, we will be conducting a 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. One moment please while we poll for questions.

Your first question for today is from Jeff Siegman with Siegman Capital.

Jeff, your line is live.

Hey, guys. Sorry about that. I was on mute here. For a little more color on the expanding Nova Ortho and Spine footprint, how do you guys see that business continuing to grow?

Well, Jeff, thanks for your question. Sure. You know, when we say footprint, we're talking about a number of things, patient volume, the scope and quality of our medical offerings and team resources. This also includes our geographic presence. These are all components that come together to create a critical and comprehensive offering for our severely underserved patient population. For instance, in 2025, we increased our average monthly patient volume across all locations. We strengthened our NOVA Ortho and Spine team with the addition of leading operational and healthcare talent. We intentionally shifted focus to a higher value surgery strategy that provided a higher level of care to our patients. And we expanded new locations, such as in Perry, Florida, which was critical to meet the needs and provide the services for our patients. So in this regard, we significantly expanded NOVA Ortho and Spine in 2025. In 2026, we're committed to further expanding Cardiff-Lexington's footprint through pursuing acquisitions that bring critical medical care to that much needed area that we've described as the broader U.S. along the I-75 corridor from our current locations in Florida and Georgia up through Tennessee, Kentucky, and into Michigan.

Got it. Thank you. That's helpful. So I guess could you talk a little bit more about capacity? I know you guys have previously stated you guys have significant available capacity at your facilities to grow into. Is that still the case?

Yes, it is. We still have considerable operating capacity in our existing network in most all of our locations where we can drive significant revenue growth without adding a whole lot of operating expenses. So as we grow, we're well positioned to both drive considerable margin improvement and to take in new patients. Looking forward, we've been limited, as we stated today, by working capital available to deploy. Therefore, it's critical to strengthen our capital base as the key next step for both growth on our current locations and improved profitability in those locations and in adding new locations. This is paramount, and it's something we have been and continue to work hard on. As we talked about today, we've been taking meaningful steps to actively position Cardiff Lexington for an uplisting to a major U.S. stock exchange. And that, to me, is the logical next step in our capital and growth strategy that supports significantly enhanced long-term value for our shareholders.

Understood. Thank you. That's all from me.

As a reminder, if you would like to ask a question, please press star one.

We have reached the end of the question and answer session, and I will now turn the call over to Alex Cunningham for closing remarks.

Thank you very much. I appreciate everyone taking the time today to get an update of where we've been and what we've been doing and where we're going. We thank you for attending. We're always available to provide any additional information that we can that's publicly disclosed, non-material information. So we look forward to talking to our shareholders at the end of the next quarter and are happy to talk to you between now and then. Thank you for joining us.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.