Welcome to the Cardiff Lexington second quarter 2025 earnings call. At this time, all participants are on a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. John Nesbett, Investor Relations. Sir, the floor is yours.
Thank you, operator. I'd like to welcome everybody to the call. Hosting the call today are Cardiff Lexington's Chief Executive Officer, Alex Cunningham, and Chief Financial Officer, Matt Shafer. I'd 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, in terms such as anticipate, expect, intend, may, will, should, or other comparable terms, involve risks and uncertainties because they relate to events and dependent circumstances that will occur in the future. These statements include statements regarding the intent, belief, and 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, Cardiff Lexington undertakes no obligation to update or revise forward-looking statements to reflect changed condition. I would now like to turn the call over to the Chief Executive Officer of Cardiff Lexington, Alex Cunningham. Please go ahead, Alex.
Thank you, John. Good morning, and thank you for joining Cardiff Lexington's first earnings conference call. With this being our first earnings call, I wanted to take the opportunity to first provide an overview of our business and the unique position we are in to drive enhanced shareholder returns and value before jumping into our second quarter results. I'll then turn the call over to Matt Shafer, our Chief Financial Officer, before opening the call to Q&A. 100% of our revenue is generated through our operating subsidiary, Nova Ortho and Spine, a provider of best-in-class orthopedic care, including primary care evaluations, care management, and interventional pain management to consistently well over 100 patients per month. These patients are primarily referred to us through a growing network of professional service providers like physicians, physical therapists, and chiropractic care providers.
Through our innovative model, we meet the demands of a severely underserved market by providing patients without health insurance access to critical medical care. Payment is almost exclusively remitted through a combination of automotive insurance settlements, general liability carriers, and private payments with an industry-leading collection rate of over 95%. This is a powerful model, particularly as it scales, and investors are beginning to take notice. For example, the broader sector has increasingly caught the attention of some of the leading private equity firms across the country. Demand is strong and growing, and we have the capacity for substantial organic growth. Currently, all of our locations on average are operating at around just 35% of capacity. From an investment perspective, Cardiff Lexington has multiple attractive growth drivers and catalysts for long-term value creation. Orthopedic healthcare is an established multibillion-dollar market with demonstrated demand.
Factor in an aging patient population and a rising number of personal and work-related injuries, as well as a recession-resistant industry like healthcare. We believe we are positioned to drive attractive long-term returns for our shareholders. As you can see on slide five, we have a strong geographic presence of existing Nova Ortho & Spine locations, with 12 clinics strategically positioned across key population centers throughout Florida and Georgia. In July of last year, we opened our 12th and most recent location in Orlando, which represented our entry into larger metropolitan areas in addition to the smaller markets throughout Florida, where our brand is both well-known and highly regarded. Moreover, Florida has the most personal injury claims per capita, according to legal studies, further enhancing demand for our services in this region.
Prior to opening our Orlando location, we also opened a clinic in Valdosta, Georgia, our first outside the state of Florida, as we execute on our plans to further expand into Georgia and up the I-75 corridor into the broader Southeast U.S. Expanding our network and footprint of locations is a strategic priority. As I mentioned earlier, we have significant untapped capacity in our existing locations to drive considerable growth and realize profitability leverage as we increase utilization. Overall, we believe that we have a unique and powerful model that addresses a crucial gap in the healthcare market. As we continue to improve our operating capacity and expand our footprint, we expect to drive significantly enhanced results over the long term. Now let's get into our second quarter results.
We delivered strong revenue growth of approximately 90% in the second quarter of 2025, as well as significantly enhanced gross margin driven by increased patient volume and more higher revenue surgical procedures performed across our 12 Nova Ortho & Spine locations. Profitability improved as well, demonstrated by adjusted EBITDA of $708,000 in the quarter, compared with an adjusted EBITDA loss of around $76,000 in the prior period. As we continue to expand our footprint and grow our business, we expect profitability to improve as a result. Lastly, we continue to prioritize and execute on our mergers and acquisition strategy, which we view as a key driver of future growth alongside our organic efforts.
We're unable to go into specific detail at this time, but we're encouraged by the interest we're seeing in the mergers and acquisition activity, and we have several exciting opportunities that we're working diligently on, which we believe could dramatically enhance our existing business. Slide seven provides a visual representation of the revenue growth and margin improvement that we recognized in the second quarter of 2025 when compared to the prior year period. We saw strong revenue growth in the quarter, and we increased both our patient volume and revenue per procedure. Importantly, in the second quarter of last year, we realized an $859,000 one-time non-cash adjustment to our revenue, which Matt will provide more information on in his remarks. Excluding this adjustment, we would have realized $2.3 million in revenue for the second quarter of 2024.
This adjustment stems from our election to accelerate cash settlements from our accounts receivables to generate more near-term operating cash flow for our business. Even when we exclude this adjustment, we reported strong growth for the quarter. This higher revenue drove significantly improved gross margins as well, demonstrating the strength of our model as we scale the business. With that, I'll now hand the call over to our Chief Financial Officer, Matt Schafer, to take a deeper dive into the financial results for the second quarter. Matt?
Thank you, Alex, and good morning, everyone. Thank you for joining us today. Turning to slide eight. Total revenue for the second quarter of 2025 was $2.8 million, compared with revenue of $1.5 million in the same quarter last year, which is an increase of approximately 90%. This increase is primarily related to higher patient volume and more higher revenue generating surgical procedures performed in second quarter of 2025. Additionally, as Alex mentioned, in the second quarter of 2024, we underwent certain efforts to accelerate cash settlement of our accounts receivables to generate more cash flow for operations, which reduced the revenue recognized in this period. Excluding this reduction, adjusted revenue in the second quarter of last year was $2.3 million.
Cost of sales increased 37.9% to $1.1 million in the second quarter, related to increases in laboratory fees and salaries, wages, and management fees, as we continue to increase patient volumes and efficiently scale our business. Despite this increase in cost of sales, gross profit in the second quarter of 2025 was $1.7 million, or 60.8% of sales, compared to $679,000 or 46.1% of sales in the second quarter of 2024. Selling, general, and administration expenses for the second quarter were $987,000, an increase of 18.3% compared to $835,000 in the prior year period, primarily related to increased personnel costs as we continue to scale and expand the business. Income from continuing operations was $610,000, or 21.9% of total revenue in the second quarter of 2025, compared with an operating loss of $159,000, or 10.8% of total revenue in the second quarter of 2024. Shifting now to our profitability metrics.
Net loss in the second quarter of 2025 totaled $1.2 million, compared with the net loss of $132,000 in the second quarter of 2024. Included in net loss in the quarter was interest expense of approximately $1.8 million. This compared to interest expense of approximately $41,000 in the prior year period. 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 for the three months ended June 30th, 2025, compared to the prior year period. As you can see on slide nine, operating income, which does not include interest expense, improved significantly when compared to the second quarter of 2024. Furthermore, we recognized adjusted EBITDA of $708,000 in the second quarter of 2025, compared with an adjusted EBITDA loss of approximately $76,000 in the prior year period.
A detailed reconciliation of adjusted EBITDA to net income is provided in our press release that has been issued. Before moving to our liquidity, I would like to briefly address and provide some context for the recent restatement of our financial results. During the second quarter of 2025, as part of our ongoing efforts to enhance internal controls over financial reporting, a detailed review of our interest expense related to cash flow classification was performed. As a result, we have restated certain amounts within condensed consolidated statements of cash flows for the six months ended June 30th, 2024, which was reclassified to correct the presentation of $845,000 of non-cash interest accrual adjustments related to our line of credit as of June 30th, 2024. These amounts, previously presented within net proceeds from the line of credit and financing activities, are now presented within operating activities.
This change in presentation has no impact on our condensed consolidated balance sheet, condensed consolidated statements of operations, or total cash flows for any related period. Moving now to the balance sheet. Our total assets as of June 30th, 2025, were $26.5 million, compared to $23.9 million at December 31, 2024. Current assets as of June 30th, 2025, included $560,000 in cash and $19.2 million of 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 June 30th, 2025, were $20.5 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 June 30th, 2025, had an outstanding balance of $12.7 million, compared to $8.6 million at December 31, 2024. With that, I'll turn the call back over to Alex.
Thanks, Matt. We are very excited about what's ahead for Cardiff Lexington, and we have a long-term strategy in place to capitalize on many growth opportunities that we see before us. Near term, we're focused on increasing our working capital and operating capacity. As I mentioned, currently all of Nova Ortho and Spine locations are operating on average around 35% capacity, due largely to working capital constraints, and we're turning business away. With more working capital, we'll be able to significantly enhance our operating capacity, revenue, and ultimately, our profitability. As I also mentioned before, we are intently focused on our strategic expansion in the broader Southeast United States. We currently have 12 Nova Ortho and Spine locations dispersed across key population centers in Florida and Georgia, with demand at many of these locations as strong as it's ever been.
Through a combination of organic growth and strategic acquisitions, we believe that we are well-positioned to expand this footprint. In that vein, mergers and acquisitions remains a key part of our long-term strategy, and we're looking at complementary verticals, including MRI clinics, ambulatory surgery centers, and other adjacent industries that can be accretive to our existing business and expand our addressable market. We are also in developed discussions with complementary opportunities which would accelerate our cash collection cycle to support our growth. In conclusion, Cardiff Lexington has demonstrated a proven ability to deploy capital at a very high rate of return. We believe that we are well-positioned with a clear strategy and path forward to drive growth and value for our shareholders. With that, we can now open the line to questions. Thank you very much.
Thank you. Ladies and gentlemen, it's time for our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star two 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. Thank you. Our first question is coming from Christopher Vasselli of Vasselli Capital Partners. Your line is live.
Hey, guys. Thanks for taking the questions. First off, is management concerned about any negative perception from the recently restated financials?
Thanks, Christopher. No, not at all, really. What you're simply seeing is the audited review process at work. Restatements like this often come down to a difference in classification. In our case, certain non-cash interest expenses were moved finance activities to operating activities on the cash flow statement. These were presentation-only adjustments and really had no impact on our cash, our earnings, our balance sheet, or our debt covenants. The fundamentals of our business remain unchanged, and our financial strength was exactly as it was reported earlier. We just made this category modification.
Got it. Thank you.
I'll add onto that. This is Matt. Thanks for the question, and thanks, Alex. Yeah. This is really more of a preferred presentation, and we recognize that there's a diversity in practice, so there's different ways to present this particular item. It's as simple as that, as Alex said. Thanks.
Got it. Okay, that's helpful. Thank you. Just additionally, one more. Just kind of curious as to what are the key factors driving Cardiff Lexington's investment and buy and build consolidation strategy within the orthopedic and spine sector?
Sure. The orthopedics and spine sector presents a very attractive opportunity to us because of three main factors. There's significant market fragmentation among providers. The providers have very consistent cash flow historically, and there's a strong possibility that profitability will continue at levels that we've seen consistent over a long period of time.
Got it. Understood. All right. That's all from me. Thank you very much.
Thank you. As a reminder, ladies and gentlemen, if you do have any questions, you may press star one on your telephone keypad. Our next question is coming from Jen Wolford of Comstock Partners. Your line is live.
Thanks. Thanks for taking the question. You all mentioned that there has been some PE investing in your sector, which I imagine brings some competition in terms of M&A. You also said in a couple of places that you're very excited about some of the M&A opportunities you're seeing. I'm just wondering if you could expand on that a little bit. You did mention Southeast in geographic. Are there, I guess, any limitations to what you're seeing, or what are you most optimistic about?
Thank you. That's an excellent question. I think we could expound on it for a great deal of time. Essentially, there are three or four companies, similar in some ways to Cardiff Lexington, that have a number of practices together in different parts of the country, the Northeast, the West, the Midwest. There seems to be an opportunity for us in the Southeast, where we are the largest consolidated player at this point. We see our marketplace moving rapidly. The participants are becoming much more sophisticated. They're more profitable. Like ourselves, they're better structured. Our strategy is consolidating this highly fragmented sector as opportunities present themselves, which seems to be quite regularly. On the ground, we're receiving interest from individual providers with comprehensive offerings and strong relationships with their client base.
These are exactly the types of businesses that we're looking for, and they're looking for the type of assistance that we can provide. At the same time, we're seeing a trend of smaller practices looking for exit strategies and physicians that want to concentrate on the practice of medicine. We think that's a very favorable environment to consolidate and create long-term value creation. We're seeing a lot of unsolicited interest from those private equity firms that are in this sector, and there's been some elevated activity over the last 18-24 months. We just think that the future is bright, the activity is robust, and that part of the country that we're very well ensconced in at this point shows a significant opportunity for our growth.
Great. Thank you. Very helpful. Thanks.
Thank you. As we have no further questions on the lines at this time, I would like to hand it back to management for any closing remarks.
Well, thank you very much, everyone, for joining the call today. We look forward to speaking to you again in November to report our Q3 results. I hope everyone has a great day.
Thank you, ladies and gentlemen. This does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.