Precipio, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Good afternoon, everyone, and thank you for joining us for Precipio's second quarter 2025 shareholder update call.

On the call today, I'm going to walk through our second quarter results, provide some additional context around what drove the quarter, discuss what we're seeing across our pathology and product businesses, and then talk about what we can expect as we move into the second half of the year. After our prepared remarks, we'll open the call for questions. I'd like to start by putting this quarter's results into perspective. Three months ago, when we discussed Q1, we explained that despite relatively flat revenue and a small cash burn, we believe the underlying business remains strong. We talked about the timing of shipping orders to customers and how that impacted quarterly revenue numbers.

We also talked about the normal seasonality in the early part of the calendar year in terms of cash collection. Most importantly, we talked about the commercial pipeline we're building and our expectations that the numbers will demonstrate that the business continues its momentum as we move through the year. I think our Q2 numbers did exactly that. For the first time in Precipio's history, quarterly revenues surpassed $7 million. We returned to positive adjusted EBITDA. We generated approximately $700,000 in operating cash flow, and we ended the quarter with more than $3 million cash in the bank, with an increase of half a million in cash in just this quarter. What I think is particularly important is we achieved that cash position organically, without raising capital. When I look at Q2, I don't simply see a good quarter.

I see another important validation of the operating model we've spent years building. Before we review the quarterly numbers, I'd like to take a moment to discuss our key strategic advantage in the market, as we've described Precipio in the past as having a unique flywheel. Our laboratory enables us to identify problems in the process of diagnosing cancer. We then develop solutions, validate them in the real-world clinical laboratory, and then commercialize those solutions to other laboratories. The pathology division generates revenue while providing us direct exposure to real-world diagnostic problems. This is a significant competitive advantage. One way I like to explain why this is an advantage is that most diagnostic companies develop a product and then try to recreate the use of the product in a clinical laboratory.

They come up with a scientific concept and then try to apply that concept to create a product they believe will have demand in the market. That doesn't always happen for various reasons, ranging from clinical utility to workflow, to regulatory or due to billing or economic hurdles. Our model is different. Our clinical experience drives product development because we already have the clinical laboratory. We experience the problems firsthand. We then develop solutions to those problems. We use those solutions ourselves in our labs to improve outcomes for the patient samples that arrive to our labs daily while demonstrating clinical, operational, and economic value. When all the boxes are checked, we begin the process of taking those products outside of our four walls.

The products are then offered to other laboratories, our customers, which results in them delivering an impact on patients far beyond Precipio's own laboratory footprint. The lab division isn't simply a service business, and the product division isn't simply a manufacturing business. They reinforce one another, and that is our flywheel. That expands our addressable market without requiring us to build another Precipio laboratory every time we want to enter a new geography or reach another customer. As our product business grows, it creates a more scalable revenue stream alongside our core pathology operations. Q2 is a good example of our unique model, where both divisions are working together simultaneously. A great example of where this model is particularly relevant is AML, or acute myeloid leukemia.

Our approach has always been to identify diagnostic problems where we can create a solution that can have a meaningful impact on patient care. AML is a great example because treatment decisions can be extremely time-critical. The A in AML stands for acute, which indeed, AML patients are at immediate risk of dying, sometimes within 48 hours. In reality, where time-critical molecular laboratory results are delivered on average in 10 to 14 days, the diagnostic market systematically fails the clinical needs of these patients. Our Rapid AML Panel delivers that critical information in one day, ensuring that the patient is placed on the appropriate therapy in a timeframe that aligns with the urgent clinical situation the patient faces. This is not a theoretical exercise either.

Every week, we receive several patient samples that are diagnosed with AML in our lab, and we observe firsthand the impact of our lab delivering those results the same day in a speed that meets the clinicians' needs to take care of their patients. Our ability to develop and clinically validate solutions within our own laboratory gives us an advantage in bringing products to market that address true clinical problems faced by laboratories and clinicians. Just as important, once we validated those solutions internally, the product business gave us the opportunity to scale them beyond the patients who come through Precipio's own laboratory. That is how we think about the relationship between innovation, patient impact, scaling a business, and shareholder value. This past phase, in particular, has garnered quite a bit of interest within numerous customers, both domestically and internationally.

In addition to actual sales, we are working on several potential marketing collaborations, as well as clinical study initiatives that will both call attention to the problem as well as put our solution front and center. Supplementing the sales effort with these marketing initiatives is a crucial element within the biotech world. In the past, we have not had the resources to drive these initiatives, but we do now, and I am looking forward to sharing some of those initiatives in the near future. Let us look at the numbers, starting with revenue. Revenue for Q2 exceeded $7 million compared with approximately $6.7 million in Q1. Perhaps more importantly, revenue increased approximately 22% year-over-year from $5.7 million in the same quarter of 2025. So we are seeing both sequential quarter and year-over-year growth.

Breaking down those numbers, our pathology business generated approximately $6.1 million in revenue compared with $6 million in Q1. This is a modest increase, but keep in mind that as we said before, our resources are focused on the commercial growth of our products. Indeed, our product business generated approximately $900,000 compared with approximately $660,000 in the prior quarter, up 35%. That is an important number. Our previous quarter record for products revenue was approximately $750,000, which happened in Q4 of last year or two quarters ago. So Q2 was approximately 21% above our previous record. I want to take a moment to connect this back to something we discussed last quarter. In Q1, we explained that one of our larger customers had moved a shipment that was expected at the end of March into early April.

We emphasized back then that this was a timing issue, not a loss of a customer and not a change in any underlying demand. Q2 gives us some opportunity to see that distinction more clearly. Intuitively, we all know that a business is an ongoing, breathing entity, and that the division into quarters is an arbitrary cutoff, a mark in the sand that does not always coincide with the organic movement of the business. Quarter-to-quarter timing will always create some variability, particularly in our products business. That is why I believe it is important to look beyond any individual quarter and focus on the positive trajectory of the business. I would like to spend a few moments on products because I think this is the more important development of the quarter. While I would say the 21% growth from our previous record high, what is equally encouraging is the continued growth of our pipeline.

During Q2, our commercial team added approximately 10 new distributor reps to the team they are working with. This opens the door to more territories and more potential customers. We have also identified over 25 new qualified customers and have over 30 meetings either being scheduled or already completed during the second quarter with those new customers. All that builds into a further increase to our pipeline. One of the challenges we have discussed in the past is figuring out the recipes of how to work with each of these distributors. We have distribution partnerships with Thermo Fisher Scientific, McKesson, Medline, and Cardinal Health, which basically covers the entire diagnostic market.