Precipio Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 18, 2026

Key Takeaways

  • Neutral Sentiment: Total Q1 revenue was flat sequentially at $6.71 million and up more than 30% year over year, with pathology revenue driving the growth while product revenue slipped due to shipment timing.
  • Negative Sentiment: Adjusted EBITDA swung to a $200,000 loss from a $960,000 profit in Q4, pressured by CMS reimbursement cuts, commercial team hiring costs, a one-time bonus accounting adjustment in the prior quarter, and lower product gross profit from timing.
  • Neutral Sentiment: CMS reduced reimbursement for a key flow cytometry test by 8%, forcing about $500,000 of revenue write-downs and compressing gross margin, though management said it is working to offset the impact through cost reductions.
  • Positive Sentiment: The newly built commercial team is showing early traction, establishing relationships with about 20 distributor reps, identifying 10 qualified opportunities, and adding roughly $3 million of annualized pipeline in Q1. Management said the total pipeline now stands near $10 million of annualized revenue potential.
  • Positive Sentiment: Management expects improvement through 2026, citing higher product revenue conversion in the second half, margin recovery as commercial investments start to pay off, positive operating cash flow, and existing lab capacity that can support materially more revenue before significant CapEx is needed.
AI Generated. May Contain Errors.
Earnings Conference Call
Precipio Q1 2026
00:00 / 00:00

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Operator

Welcome to the Precipio first quarter 2026 shareholder update conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note that the conference is being recorded. Statements made during this call contain forward-looking statements about our business. You should not place undue reliance on forward-looking statements as these statements are based upon our current expectations, forecasts, and assumptions and are subject to significant risk and uncertainties. These statements may be identified by words such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential, forecast, continue, or the negative of these terms, other words or terms of similar meaning.

Operator

Risk and uncertainties that could cause our actual results to differ materially from those set forth in any forward-looking statements include, but are not limited to, the matters listed under risk factors in our annual report on Form 10-K for the year ended December 31st, 2025, which is on file with the Securities and Exchange Commission, as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission. These reports are available at www.sec.gov. Statements and information, including forward-looking statements, speak only to the date they are provided, unless an earlier date is indicated. We do not undertake any obligation to publicly update any statements or information, including forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Now, let me hand the call over to Ilan Danieli, Precipio CEO.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Good afternoon, everyone, thank you for joining us today for Precipio's Q1 2026 shareholder update call. On today's call, we'll walk through our financial results, provide an update on our operations and commercial progress, and then for the first time, in following requests from several of our shareholders, we're gonna open it up for live Q&A from the audience. At the end of my remarks, the operator is gonna take over and provide instructions for those who wanna ask a question. Before reviewing the quarterly financials for Q1, I'd like to take a moment to step back and discuss where we believe the company is in the execution of its strategy. Our mission at Precipio is centered around advancing cancer diagnostics by delivering faster, more accessible and more actionable testing solutions to laboratories and clinicians.

Ilan Danieli
Ilan Danieli
CEO at Precipio

What makes our model unique is that we're not only developing products in isolation. By operating our own clinical laboratory, we identify real-world diagnostic challenges firsthand, validate solutions rapidly in a clinical environment, and then once our products have demonstrated their clinical, operational and financial value, we commercialize them to the broader market. Over the past several quarters, we've continued to strengthen both sides of that model. Our pathology business continues to provide a stable and growing operational foundation while generating cash flow to the company. Our products business and expanding commercial infrastructure are positioning the company for scalable long-term growth, margin increase, and cash generation. Before we get to the numbers, I'd like to take a moment to discuss a topic that several people have raised and that is the variability and predictability of the company's revenues.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Let's break it down by division, starting with pathology services. Generally speaking, the pathology services business is relatively predictable. Once we win a customer, they usually have a consistent number of patients coming in. There's a relatively consistent percent of those patients that will require some sort of biopsy, which is sent to our lab. Testing modalities are pretty standard. We control costs extremely well, so there isn't much variance there. The same goes for revenue build, reimbursement, and cash collected, all quite predictable. There are two elements that are outside of our control and can cause fluctuations in the division performance. The first is customer transition. For example, a physician may retire or their practice may get acquired by a large hospital network that internalizes testing. In those situations, the patient sample flow from that customer will stop.

Ilan Danieli
Ilan Danieli
CEO at Precipio

The second element, which we experienced this quarter, is a change to reimbursement. Each year, usually in January, CMS comes out with its new fee schedule. As a government organization, there's no negotiations, the new fee schedule basically becomes our new pricing. As you can imagine, there are very few rate increases and usually it goes the other way. In early Q1 of this year, the new 2026 CMS fee schedule was released and it included a reduction of 8% in the fee for one of our most frequently used tests, flow cytometry. Subsequently, we had to write down revenue this quarter to the tune of approximately half a million dollars, creating a significant swing in net income from the prior quarter.

Ilan Danieli
Ilan Danieli
CEO at Precipio

While there was no change to our customer base or patient sample volume, the new fee schedule introduced by CMS impacted our revenue, net income, and gross margins. We've been working on several projects to reduce our operating costs and bring back up that margin, essentially reversing the impact of the fee schedule. As you saw, our cash flow from operations was still positive. That essentially covers the drivers of variability in the pathology services business. On the product side, generally speaking, once a customer is live and operating, revenues are quite stable and predictable. This quarter, we saw an $80,000 decline in revenue from the prior quarter, and this was due to one of our main customers shifting the date of their order from the end of March to early April.

Ilan Danieli
Ilan Danieli
CEO at Precipio

While nothing changed from a customer perspective, following the principles of revenue recognition, of course, this order will be part of Q2 revenue. This is one relatively small factor that can cause fluctuations within the product business. The second and more challenging variable is the onboarding process for customers. We've discussed this in the past and shared stories ranging from IT roadblocks to machine downtime during validations. I know many of you have inquired about guidance and forecasting, and I do think that as we grow the customer base and gain more experience, we will be able to better predict our future growth. Also, with a new commercial team building a broader pipeline, that will help us gain better insight into future growth as well. I'll add more on the pipeline later in this call.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Even within the product business, those fluctuations are mostly related to initial setup of the customer. Once the customer is live, there are far fewer fluctuations and revenue is more predictable. As we grow our customer base and get more experience under our belt, I do think we will eventually reach the point where we can begin to become more comfortable in predicting revenue growth. In summary, as with any business, we have to deal with fluctuations both internal, but in our situation, more from external factors that are largely outside of our control. However, they are more prevalent in the pathology services business than the product business, which is yet another reason why the product business is our growth focus. With that, let's turn to a review of our financial results for the quarter.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Total revenue for Q1 remained flat quarter-over-quarter at $6.71 million and up over 30% from the same quarter last year. Pathology revenue increased a little over $6 million this quarter from $5.9 million the previous quarter and up 36% from $4.4 million in Q1 of last year. Product revenue decreased by $80,000 from $740,000-$660,000 this quarter, impacted by the timing of a customer shipment originally expected later in the quarter that moved into Q2. From an accounting standpoint, that revenue shifts quarter, but from a business standpoint, nothing really has changed.

Ilan Danieli
Ilan Danieli
CEO at Precipio

More importantly, the quarter reflects continued progress in areas we believe are the strongest indicators of future growth, particularly commercial expansion, distributor engagement, and pipeline development, marking a foundational quarter for our expanded commercial strategy. I'd like to take a few moments to discuss those results. As we've mentioned, we recently invested in hiring a dedicated commercial team focused on accelerating adoption of our proprietary product portfolio through distributor relationships and direct customer engagement. Given the onboarding and sales cycle associated with molecular diagnostic products, the team's initial focus has been on building relationships and educating our distribution partners, identifying qualified target accounts, and developing a scalable pipeline. This takes place via a process that begins primarily with our distributors.

Ilan Danieli
Ilan Danieli
CEO at Precipio

As we've described in the past, our team has to first form relationships with the distributor reps and familiarize them with our company, with our value proposition, and with our product offering. Once that occurs, they can begin to review with each rep their territory and identify qualified potential leads. The way we qualify leads is through a pretty straightforward process. First, we ensure that the customer has existing cancer diagnostic operations and is either running some of the tests our products replace in-house or most likely sending them to an outside lab. This establishes the customer as an appropriate target lab. Once we've established that, we learn which products they're interested in and their annual volumes to assess and assign an estimated annual dollar revenue potential based on their existing testing volume for our panels.

Ilan Danieli
Ilan Danieli
CEO at Precipio

With an annual revenue potential number, this account now becomes a qualified lead, we begin the work together with the distributor rep of arranging an introduction meeting to start the sales process. That work started with the hire of the commercial team at the start of the year and is already beginning to produce measurable results. During Q1, the commercial team established relationships with approximately 20 new distributor reps, identified two, sorry, 10 new qualified customer opportunities, and added approximately $3 million of annualized revenue potential to the pipeline. Combined with existing opportunities, our current commercial pipeline now represents approximately $10 million in annualized revenue potential. As a reminder, this does not translate into a forecast of $10 million for this year because the X factor we don't know is when each customer will go live.

Ilan Danieli
Ilan Danieli
CEO at Precipio

We do feel that this represents a thorough and responsible process for targeting customers and generating a sales funnel and future pipeline. We believe this is particularly encouraging given that the sales team only joined at the start of the year and initially underwent extensive training on our technology, product portfolio, market dynamics, and competitive positioning. Many of these early results validate both the market opportunity as well as our commercial strategy. As the team continues expanding distributor relationships and converting qualified opportunities into active customers, we expect the pipeline to continue to grow as well as also increase converting into recurring revenue. Let's turn to profitability and margins. Adjusted EBITDA for the quarter was negative $200,000, compared with positive $960,000 in Q4 of 2025.

Ilan Danieli
Ilan Danieli
CEO at Precipio

A relatively large swing I'd like to take a few moments to discuss. Importantly, the majority of that sequential change was driven by a combination of timing-related items, non-recurring accounting impacts, and investments we're making to support future growth. There were four primary factors impacting QoQ EBITDA change. First, as discussed, this quarter, we experienced a reimbursement-related impact tied to the change in certain CMS pathology billing codes, which reduced our gross profit by approximately $125,000. Second, the hiring of our commercial team resulted in an increase of approximately $250,000 for the quarter. This includes payroll, travel, and business development expenses, as well as marketing activities. As we shared, we've already seen commercial benefits from this hiring in terms of the pipeline growth.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Importantly, we view this not only as incremental overhead but as a strategic investment in building the commercial platform necessary to scale our products business over the coming years. In other words, once this team begins to generate increased revenue of, let's say, $1 million per quarter, the investment of a quarter million dollars per quarter will certainly have paid off. Third, in Q4 2025, we benefited from a one-time, non-recurring accounting adjustment related to previously accrued bonus compensation, which created an approximately $260,000 positive swing in adjusted EBITDA compared to the current quarter. Lastly, we saw a $280,000 reduction in product gross profit related to the delivery timing shift from late Q1 to early Q2 and reduced production volumes. From a business activity perspective, this revenue was not lost.

Ilan Danieli
Ilan Danieli
CEO at Precipio

It simply moved across reporting periods. The combination of these factors caused a $1 million swing in EBITDA. As you can see, a significant dollar amount of these are one-time changes that are unrelated to the company operations. Moving now to discuss gross margins. Company gross margin for the quarter was 40% compared to 47% in Q4. As with EBITDA, we believe it's important to distinguish between structural margin pressure and temporary or investment-driven impacts. The margin compression this quarter was primarily associated with the same factors we just discussed. Revenue timing, reimbursement changes, and investments in commercial capacity that are now largely in place. Also, Q4 margins were somewhat inflated due to overproduction of products in Q4 relative to Q1 due to the expected equipment downtime for maintenance as we stated previously.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Resumption of regular production volume and continued growth will bring a return to higher margins, which are inherent in the underlying economics of this business. What gives us confidence going forward is that many of these costs are relatively fixed in nature. As revenue grows, particularly in the product segment, we believe the business has the potential to generate meaningful operational leverage. Overall, for the business, we would expect company margins to not only recover as product revenue scales but over time, potentially improve beyond historical levels as the revenue mix increasingly shifts to our proprietary products and product-driven services. Turning briefly to cash flow. Total cash flow for the quarter was negative approximately $40,000, while cash flow from operations remained positive at approximately $60,000.

Ilan Danieli
Ilan Danieli
CEO at Precipio

This pattern is generally consistent with what we historically see in the first quarter of the year, driven primarily by the combination of start-of-the-year annual expense resets, along with slower collections associated with patient insurance deductible cycles. Importantly, we don't view the quarter's cash flow performance as a negative of any structural change in the business, but rather normal seasonality that we expect to normalize as the year progresses. Looking ahead, a couple of points I'd like to make. First, we expect continued expansion of our commercial pipeline and increased conversion of that pipeline into revenue during the second half of the year. Second, we expect margins to improve as recent commercial investments begin contributing more meaningfully to revenue growth, and we scale up production. Finally, overall, we expect stronger operational performance as we move through the balance of 2026.

Ilan Danieli
Ilan Danieli
CEO at Precipio

While quarterly results may fluctuate at times due to reimbursement dynamics, shipment timing, or seasonality, we do believe the broader trajectory of the business remains very positive. We're continuing to grow our commercial reach, extend our pipeline, strengthen our product platform, and invest in the infrastructure we believe necessary to build a substantially larger and more scalable business over time. With that, I'm gonna hand it over to the operator to open up the call for questions. Operator, please go ahead. Thank you.

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. To join the question queue, you may press star then one on your touchtone phone. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then the number 2. We'll pause for a moment to compile the Q&A roster.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Thank you, Chloe. Meanwhile, as we build this roster, there's a couple of questions that were sent in in advance of the call. I'm gonna go through those, and then we can go to the live Q&A. The first question was, can you elaborate on the utilization rate of your labs, or in other words, how much more revenue can your current laboratories generate without significant CapEx? We're currently operating pathology services business at approximately $24 million on an annualized basis. We believe that, but this depends on the case mix, we have between $45 million-$50 million in laboratory capacity before we need to make any changes that involve any significant CapEx or hiring.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Second question. In your recent corporate deck, there's a slide that mentions the expansion potential of your technology into broader multi-million dollar markets. Is there a specific roadmap for these expansion plans? If yes, how much additional CapEx and R&D expenses is foreseen with which kinds of financings? That's a really important question, and it really gets to the core of how we think about the long-term evolution of Precipio. Today, our primary focus remains execution within our existing product portfolio and the markets we already serve. Even within our current addressable market, we're still at the very early stages of market penetration. To put that in perspective, our products business generated just under $3 million in revenue last year, and this is within an annual TAM of about half a billion dollars in the U.S.

Ilan Danieli
Ilan Danieli
CEO at Precipio

We see a very significant runway for growth with the products we already have in place. That said, one of the reasons we reference broader market opportunities in our corporate materials is because we believe the underlying platform we've built have applications well beyond our current hematology-focused offerings. What's unique about Precipio is not any single product, it's the model itself, the combination of a real-world clinical laboratory environment, proprietary diagnostic workflows, operational validation capabilities, and commercial distribution infrastructure. We believe that over time, this model can be applied to additional areas of diagnostics. Having said that, we intend to approach expansion in a disciplined manner. Our philosophy is to continue scaling the existing product business, expand recurring revenue, strengthen cash flow generation, and leverage the commercial infrastructure we're building today.

Ilan Danieli
Ilan Danieli
CEO at Precipio

As the company grows and becomes increasingly well-capitalized, we believe we'll be in a strong position to selectively expand into adjacent markets without necessarily requiring the kind of large-scale R&D spending and associated capital typically associated with traditional diagnostic companies. I think that's a really important distinction because our development model is tightly integrated with our clinical operations, and we think we can potentially enter new markets with a lower development risk, shorter validation cycles, and significantly more capital efficiency than many traditional life sciences. In summary, while we're not announcing any specific expansion initiatives today, we do believe the long-term opportunity for the platform extends meaningfully before the markets we currently serve. All right. With that, Chloe, let's go to our first question.

Operator

We have a question from Adam Hutt from Leviticus Partners. Your line is open.

Adam Hutt
Analyst at Leviticus Partners

Hey, guys. Thank you. It's really just a continuation of what the questions you've kind of already answered, would you be likely at all to open up a, for instance, a facility in the Midwest or the West? Would the logistics preclude that, or is transportation so efficient that, you know, you'll never need another facility elsewhere?

Ilan Danieli
Ilan Danieli
CEO at Precipio

Thanks, Adam. Hey, good to hear from you. Good question. I don't think so. Logistics are, for the most part, quite good, and there really isn't a significant need to spend that kind of money to duplicate the facility. I can tell you, for example, as you know, our lab is in Connecticut. Even from New Jersey, samples get picked up by FedEx, and they fly through Memphis and arrive the next morning at 9 or 10 in the morning. There really isn't much advantage, you know, even from an adjacent state, there isn't much logistic advantage to having something on the West Coast.

Ilan Danieli
Ilan Danieli
CEO at Precipio

I think if anything, as we get to that point, you know, we'll expand capacity, which for a large part is mostly on the CapEx kind of equipment side and at those revenue levels, it's a very efficient process.

Adam Hutt
Analyst at Leviticus Partners

New Haven would expand. No Los Angeles facility. Okay.

Ilan Danieli
Ilan Danieli
CEO at Precipio

No, no. There's no need for that.

Adam Hutt
Analyst at Leviticus Partners

Thank you.

Ilan Danieli
Ilan Danieli
CEO at Precipio

You bet. All right. Chloe, it seems like that's the only question.

Operator

Yes, there are no questions at this time. Thank you for attending today's presentation. Oh, we have one from Thomas Duxbury. Your line is open.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Okay.

Analyst

Hi, Ilan. Congrats on the continued ramping and cash flow management of the company. I guess could you give us a little bit more color on the ramp, especially on the product side from Q2 onward through the rest of the year? I assume with that order shipping in Q2 into April, that Q2 will obviously be up from Q1 and hopefully with the commercial team that you have now in place, that we will see an even better loaded back half of the year. Thank you.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Yeah. Hey, Tom. Good to hear from you. Yeah, I hope so too. I think, you know, the commercial team has probably had already a better than expected impact in Q1. As I mentioned, keep in mind, you know, they've only been those four months, I would say at least half of that time has been for training. To add about a $3 million of pipeline is great, I think that's only gonna increase over time. Of course, the X factor, you know, is how long does it take to translate that $3 million of pipeline into $3 million of revenue and this is where it gets really difficult because a lot of those factors are out of our control.

Ilan Danieli
Ilan Danieli
CEO at Precipio

You know, as an example, we had a customer I just spoke with a customer this morning who has completed the validation and is ready to go live from a technical standpoint. What they're now waiting for is to set up a meeting with all the physicians to teach them how to order the new test of the system. It sounds mind-numbingly ridiculous, quite frankly, but those are the things we face. You know, this is a huge organization, so they have these meetings once a quarter, and that hasn't been scheduled yet. You know, this meeting could happen next week, and the customer goes live. This meeting could happen in July, and then the customer goes live.

Ilan Danieli
Ilan Danieli
CEO at Precipio

It's really hard to kind of figure out what is the timeline for these customers to transition from readiness to go live and when that translates into revenue? I think, you know, the best thing I can offer is sufficient. If the customer says, "Hey, we want to order $100,000 of products next week," we can deliver that. You know, and you know, unfortunately, things we can only control, we can control. Hope that helps.

Analyst

Thank you.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Thank you.

Operator

We have a question from Adam Hutt from Leviticus Partners. Your line is open.

Adam Hutt
Analyst at Leviticus Partners

One for the road, boys. I'm familiar with a company called Interpace that had a pancreatic cancer test. They pretty much got knocked out by the insurance companies. Stock has been a big wealth destructor. Obviously, the blood cancers, I think, are probably you're able to show much more efficacy and return on the dollar, I think, than a particular pancreas test. Should any of us be losing sleep over the insurance monster? That's a bit of a bugaboo this quarter.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Thank you, Adam. Yeah. You know, I don't know if it's losing sleep, but it's always a concern because you know, they're the payers and they're the ones who ultimately decide. You know, it's not a usual kind of supply and demand model. It's really the payers kind of determine what the revenue or what the payments are gonna be. Having said that, all of our products and certainly all of our services use established CPT codes. I'm not familiar with Interpace, but you know, if there's a company that doesn't have an established CPT code or it's a new code that was just assigned, there's a lot of uncertainty around that, and I don't really think that exists.

Ilan Danieli
Ilan Danieli
CEO at Precipio

You know, our tests, and the codes we use are long ago established codes, and they're not going anywhere. They're supported by, you know, thousands of pages of clinical validated data. I think in that sense, you know, are there gonna be rate fluctuations like we saw? Sure. We as a company have to respond by being more efficient to keep that margin. We're doing exactly that. I don't think it's gonna be a situation where they're gonna say, "You know what? We're not testing for [inaudible] not paying for that anymore." I don't think that's gonna happen. I think relatively speaking, we're okay.

Adam Hutt
Analyst at Leviticus Partners

Do you have any restitution against the rate at which they try and lower you to? What can you do besides just margin from within?

Ilan Danieli
Ilan Danieli
CEO at Precipio

No.

Adam Hutt
Analyst at Leviticus Partners

Can't really sue the insurance companies, can you?

Ilan Danieli
Ilan Danieli
CEO at Precipio

No.

Adam Hutt
Analyst at Leviticus Partners

Can you?

Ilan Danieli
Ilan Danieli
CEO at Precipio

No, you can't. No, you can't. That's pretty much it. For the most part, you know, we haven't really seen anything egregious when there's, you know, when there's clinical support data. It's usually relatively stable and you know, this is kind of the first drop that we've seen in 15 years of operating. It's an 8% drop on one of our tests. It's a frequently run test, but it's an 8% drop. I think in general, this is a pretty stable field.

Adam Hutt
Analyst at Leviticus Partners

Thank you.

Ilan Danieli
Ilan Danieli
CEO at Precipio

Thank you.

Operator

All right. There are no questions at this time. This concludes today's conference. Thank you for attending. You may now disconnect.

Executives
Analysts
    • Adam Hutt
      Analyst at Leviticus Partners
    • Analyst
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