Strategic Performance and Operational Drivers

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• Reported GAAP revenue decline of $1 million primarily due to the strategic restructuring of the GE Healthcare biomedical services contract, which reduced revenue by $1.6 million but improved overall earnings by lowering direct contract expenses.

• Achieved 1.7% pro forma revenue growth when adjusting for the GE contract impact, supported by a 6.4% increase in Patient Services revenue.

• Wound Care revenue surged nearly 112% to $2.1 million, driven by the expansion of the compression device product line and the addition of a second supplier for adjustable compression wraps.

• Successfully launched the new Enterprise Resource Planning (ERP) system on March 1, 2026, marking a 20-month milestone to integrate disparate legacy workflows into a common platform.

• Device Solutions revenue decreased by 17%, with 70% of the drop attributed to the GE restructuring and the remainder impacted by a large customer rental buyout that elevated prior-year equipment sales.

• Management successfully replaced a portion of lost GE revenue through non-GE biomedical services, which grew by $340,000 and contributed to a 7% increase in device services gross margin.

Outlook and Strategic Assumptions

• Maintained pro forma annual revenue growth guidance of 6% to 8% for 2026, assuming the $7.1 million annual revenue reduction from the GE contract restructuring.

• Anticipate adjusted EBITDA margins to remain in the low to mid-20% range, inclusive of ongoing IT system upgrade costs.

• Expect ERP project expenses to begin tapering down after the second quarter of 2026 as the company moves from the go-live phase to stabilization and enhancement.

• Oncology RCM platform migration is scheduled for the second half of 2026, intentionally staggered to follow the ERP implementation to manage internal resource capacity.

• Projected capital expenditures for 2026 are expected to remain moderate and similar to 2025 levels as revenue growth shifts toward less capital-intensive sources like Wound Care.

Operational Risks and Structural Changes

• The first month of the ERP go-live was not entirely seamless, with management currently addressing initial bugs and process adjustments to stabilize the system.

• Experienced a significant increase in health care benefit costs, which rose by $374,000 during the quarter, representing a sharper increase than in prior years.

• The Chemo Mouthpiece (CMP) initiative was excluded from 2026 guidance after failing to receive the expected coding approval from CMS in early 2026.

• Gross margin was negatively impacted by approximately 2.5% due to cost inflation related to higher employee wage rates and health care expenses.