ADVANCED DIAGNOSTICS EAST — OPERATIONAL VIEW P&L

Q1 2026 vs Q4 2025 Variance Analysis
Operator-Controllable View | Prepared by FP&A — April 2026
Excludes non-operational & fixed items: Other Revenue, Depreciation & Amortization, Interest Expense, Rent, Management Fees, Legal Settlements.
Q1'26 Net Rev
$3.48M
▲+0.6% vs Q4'25
Q1'26 Var Costs
$2.93M
▼+20.2% favorable vs Q4'25
Q1'26 Op Margin
$553K
▲+360.2% vs Q4'25
Op Margin %
15.9%
+22.0 pts QoQ
QoQ $ Var (OpM)
$766K
Favorable
Headline: Operational turnaround — margin flipped positive on labor discipline.

Operational P&L — Q4 '25 vs Q1 '26

Line ItemQ4 2025Q1 2026$ Variance% Variance
NET REVENUE
Commercial Insurance - Net$2.03M$1.93M($103K)-5.0%
Personal Injury - Net$1.43M$1.55M$125K+8.8%
TOTAL OPERATIONAL NET REVENUE$3.46M$3.48M$22K+0.6%
VARIABLE / CONTROLLABLE COSTS
Salaries & Wages$1.98M$1.52M$463K+23.4%
Employee Benefits$169K$128K$41K+24.1%
Physician Fees$526K$316K$210K+40.0%
Professional Fees$58K$56K$2K+4.0%
Repairs & Maintenance$248K$156K$92K+37.3%
Supplies & Other$544K$339K$206K+37.8%
Telephone & Utilities$168K$169K($1K)-0.6%
Insurance$93K$94K($930)-1.0%
Advertising$5K$3K$3K+48.9%
Travel, Meals & Entertainment$219$0$219+100.0%
Other Expense($120K)$152K($272K)-226.1%
TOTAL VARIABLE COSTS$3.67M$2.93M$744K+20.2%
OPERATIONAL MARGIN
OPERATING MARGIN($213K)$553K$766K+360.2%
Operating Margin %-6.1%15.9%+22.0 pts-
Variance convention: Revenue & Margin — positive = favorable (Q1 > Q4). Expenses — positive = favorable (expense decreased Q4 → Q1). Green = favorable, Red = unfavorable.

Management Commentary

Revenue: Net operational revenue essentially flat at $3.49M (+$25K / +0.7%). Underneath: CI gross up $3.4M but offset by $3.5M higher CI contractuals (net neutral, suggesting gross-to-net compression), while PI revenue declined ($1.4M) with partial relief from $1.5M better PI adjustments. Payer mix is shifting toward CI.

Costs: Variable costs fell $744K (-20.2%) — favorable and the strongest cost story across all four locations. Salaries & Wages down $463K (-23.4%), Physician Fees -$210K (-40%), Supplies -$206K (-38%), Repairs -$92K.

Margin: Operating margin flipped from ($213K) loss to $557K profit — a $769K swing. Monthly trend shows consistent improvement ($38K → $208K → $311K) confirming the turnaround is underway, not a one-time event.

Monthly Revenue & Variable Costs (Q4'25 ➔ Q1'26)

Monthly Operating Margin

Top 2 Drivers & Operational Flags

Key Performance Drivers
  1. Labor Rightsizing: Salaries & Wages reduced $463K (-23.4%) — the largest single driver of the turnaround.
  2. Physician Fee Discipline: Physician fees down $210K (-40%), aligned with case mix rebalancing.
Operational Flags
  • CI Gross-to-Net Compression: CI gross up $3.4M but CI contractual adjustments up $3.5M — effectively 100% write-down on incremental CI billings. Investigate payer contracts / coding.
  • Other Expense Reversal: Other Expense flipped from ($120K) credit in Q4 to $152K charge in Q1 — $272K unfavorable. Investigate Q4 one-time credit / reversal.
Advanced Diagnostics Healthcare System — Confidential — East Operational View — Generated April 2026