Precipio (NASDAQ:PRPO) reported flat sequential revenue for the first quarter of 2026 while management pointed to year-over-year growth, expanded commercial activity and a larger sales pipeline as key indicators of the company’s longer-term direction.
Chief Executive Officer Ilan Danieli told shareholders that total revenue for the quarter was $6.71 million, essentially unchanged from the prior quarter and up more than 30% from the first quarter of 2025. Pathology services revenue rose to a little over $6 million from $5.9 million in the previous quarter and increased 36% from $4.4 million in the year-earlier period. Product revenue declined by $80,000, to $660,000 from $740,000, which Danieli attributed to the timing of a customer shipment that moved from late March into early April.
CMS Reimbursement Change Weighed on Results
Danieli spent part of the call addressing revenue variability, particularly within the company’s pathology services business. He said the pathology business is generally predictable once customers are onboarded, because patient volumes, testing modalities, reimbursement and cost controls tend to be consistent.
However, he said two outside factors can create fluctuations: customer transitions and reimbursement changes. In the first quarter, Precipio was affected by the 2026 fee schedule from the Centers for Medicare and Medicaid Services, which included an 8% reduction in the fee for flow cytometry, one of the company’s most frequently used tests.
Danieli said the change required the company to write down revenue by approximately $500,000 during the quarter, affecting revenue, net income and gross margins despite no change in customer base or patient sample volume. He added that Precipio is working on projects to reduce operating costs and restore margins.
On the product side, Danieli said revenue is typically stable once customers are live, but onboarding can be difficult to forecast because implementation depends on customer-specific issues such as information technology requirements, validation timelines and equipment downtime.
Commercial Pipeline Reaches $10 Million in Annualized Potential
Management highlighted the early impact of a newly hired commercial team focused on accelerating adoption of Precipio’s proprietary product portfolio through distributor relationships and direct customer engagement.
Danieli said the team, which joined at the start of the year, initially focused on training, building distributor relationships, identifying qualified target accounts and developing a scalable pipeline. During the first quarter, the team established relationships with approximately 20 new distributor representatives, identified 10 new qualified customer opportunities and added roughly $3 million of annualized revenue potential to the pipeline.
Combined with existing opportunities, Danieli said Precipio’s current commercial pipeline represents approximately $10 million in annualized revenue potential. He cautioned that this should not be interpreted as a forecast for 2026 because the company does not know when each customer will go live.
“The X factor we don’t know is when each customer will go live,” Danieli said, adding that the process is intended to create a responsible sales funnel and future pipeline.
Profitability Pressured by Timing, Reimbursement and Investment
Adjusted EBITDA was negative $200,000 in the first quarter, compared with positive $960,000 in the fourth quarter of 2025. Danieli said the sequential change was driven by timing-related items, non-recurring accounting effects and investments to support future growth.
He identified four primary contributors to the change:
- A reimbursement-related impact tied to CMS pathology billing code changes, which reduced gross profit by approximately $125,000.
- Approximately $250,000 in increased costs related to hiring the commercial team, including payroll, travel, business development and marketing expenses.
- A one-time fourth-quarter 2025 accounting adjustment related to previously accrued bonus compensation, which created an approximately $260,000 favorable comparison in that period.
- A $280,000 reduction in product gross profit related to shipment timing and lower production volumes.
Company gross margin was 40% in the first quarter, down from 47% in the fourth quarter. Danieli said the decline reflected revenue timing, reimbursement changes and commercial investments, as well as higher fourth-quarter product margins tied to overproduction ahead of expected equipment downtime for maintenance.
Danieli said Precipio expects margins to recover as product revenue scales and production volumes normalize. He said many costs are relatively fixed, creating potential operating leverage as revenue grows, particularly in the product segment.
Cash Flow and Capacity
Total cash flow for the quarter was negative approximately $40,000, while cash flow from operations remained positive at about $60,000. Danieli said the first quarter often reflects seasonal effects, including start-of-year expense resets and slower collections related to patient insurance deductible cycles.
In response to a shareholder question submitted in advance, Danieli said Precipio’s pathology services business is currently operating at approximately $24 million on an annualized basis. Depending on case mix, he said the company believes it has $45 million to $50 million in laboratory capacity before needing significant capital expenditures or hiring.
During the live question-and-answer session, Danieli said the company does not expect to open a separate facility in the Midwest or on the West Coast because logistics are efficient enough to support sample transport to its Connecticut laboratory. He said future capacity expansion would likely take place in New Haven and would mainly involve equipment-related capital expenditures.
Outlook Focuses on Second-Half Conversion
Looking ahead, Danieli said Precipio expects continued expansion of its commercial pipeline and increased conversion of that pipeline into revenue during the second half of 2026. He also said the company expects margins to improve as commercial investments contribute more meaningfully to revenue growth and production scales.
In response to a question about the product revenue ramp, Danieli said the commercial team had a “better than expected impact” in the first quarter, though he emphasized that customer go-live timing remains difficult to predict. He gave an example of a customer that had completed technical validation but was waiting to schedule physician training before launching.
On reimbursement risk, Danieli said payers remain an ongoing concern for any diagnostics company. However, he said Precipio’s products and services use established CPT codes supported by clinical validation data. He described the recent 8% reduction on one frequently run test as the first such drop the company has seen in 15 years of operating, and said Precipio’s response is to improve efficiency to protect margins.
Danieli said that while quarterly results may fluctuate due to reimbursement dynamics, shipment timing or seasonality, management believes the broader trajectory of the business remains positive as the company expands its commercial reach, builds its pipeline and invests in infrastructure for a larger business.
About Precipio (NASDAQ:PRPO)
Precipio, Inc is a clinical-stage diagnostics and medical technology company focused on advancing the detection and management of hematologic diseases. The firm develops precision diagnostic solutions that integrate digital morphology, immunophenotyping, and molecular testing to improve the diagnosis of leukemia and related blood disorders. Precipio’s approach is designed to enhance the accuracy and speed of laboratory workflows, helping physicians tailor treatment strategies more effectively.
The company’s core offerings include an automated digital imaging and analysis platform that captures and classifies blood and bone marrow cell images at high throughput.
