ADICON HOLDINGS

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Adicon 2026 Interim Results Presentation

[AI Key Takeaways]

Financial Performance

- Total revenue in the first half of 2026 was approximately RMB 1.285 billion, up about 1.1% year-on-year, marking a return to positive revenue growth

- Gross margin increased to 37.9%, up 2.1 percentage points year-on-year

- Adjusted net profit reached RMB 51.42 million, a year-on-year increase of 19.6%

- Adjusted EBITDA was RMB 184 million, up 11.7% year-on-year

Business Progress

- The revenue contribution from the specialized testing segment rose to 30%, with a five-year compound annual growth rate (CAGR) of 26%.

- New orders for co-built businesses surged 114% year-over-year, while revenue from public tertiary hospitals grew 11% year-over-year.

- Total winning bid amount reached RMB 690 million, up 100% year-over-year, effectively doubling the business volume.

- Deepened strategic partnerships with industry leaders such as Mindray Medical, Jointown Pharmaceutical, and Gan & Lee Pharmaceuticals.

Next Quarter Guidance

- Targeting double-digit growth in the second half of the year.

- Also targeting double-digit growth by 2027.

- Confident in growth for the second half of this year and next year, backed by the current order backlog.

Opportunity

- The construction of district-level testing centers has become a key growth engine, benefiting from policy dividends under the 'Thousand Counties Project'.

- 'AI for Science' is creating industry opportunities, while the development of innovative drugs, such as mRNA vaccines, is driving demand for testing services.

- Deepening cooperation with leading companies across the industrial chain to build a comprehensive and efficient co-construction service system.

- Accelerated consolidation among small and mid-sized ICL companies presents M&A opportunities for the Company

Risks

- The policy guidelines on pricing for laboratory tests may exert downward pressure on prices

- Extended days sales outstanding (DSO) pose challenges to the collection cycle

- Impact of macroeconomic shifts on customer budgets and payment capabilities

[AI Conference Transcript]

Host

All participants are currently muted. We will now proceed with the disclaimer statement. This conference is intended solely for invited investors. The audio and transcript of this meeting are for internal use by participants only and must not be publicly disclosed. Adicon Holdings has not authorized any media outlet to rebroadcast or redistribute the content of this meeting. Any unauthorized reproduction or redistribution constitutes infringement, and Adicon Holdings reserves the right to pursue legal liability.

Adicon Holdings assumes no liability for any losses or responsibilities arising from reposting or redistribution. The market involves risks; please invest with caution. Investors are reminded to make prudent decisions. Before the meeting begins, we would like to inform all investors that there will be a Q&A session after the keynote speaker's remarks.

Next, please allow me to introduce the Company's management team attending this meeting: Mr. Wang Legang, Executive Director and CEO of Adicon; and Mr. Wang Zhihan, Chief Financial Officer and Joint Company Secretary of Adicon. We now invite our keynote speaker to deliver the opening remarks. Thank you.

Wang Legang

Distinguished investors and analysts, good evening. I am Wang Legang, Executive Director and Acting CEO of Adicon. Thank you all for joining Adicon's 2026 First Half Results Presentation.

Overall, we are pleased to see that the Company reached a critical inflection point for growth in the first half of 2026, with core businesses entering a fast-growth track. Adicon remains committed to high-quality development, and our overall operational performance stands out in the industry.

Based on operational data, the company achieved total revenue of approximately RMB 1.285 billion, representing a year-on-year increase of about 1.1%. Revenue has returned to positive growth, making the company the first in the ICL industry to achieve substantial positive growth across its entire business in the first half of the year.

By business segment, our strategic focus areas performed outstandingly. CRO revenue increased by approximately 34.9% year-on-year, with the value of new orders nearly doubling. Co-construction revenue rose by about 17.4% year-on-year, with new order values doubling compared to the same period last year. Specialized testing revenue grew by approximately 11.1% year-on-year, achieving synergistic growth across multiple product lines.

Alongside the recovery in revenue growth, the company's profitability has improved significantly. The gross margin for the first half rose to 37.9%, an increase of 2.1 percentage points year-on-year. Adjusted net profit reached RMB 51.42 million, up 19.6% year-on-year. Adjusted EBITDA stood at RMB 184 million, representing an 11.7% year-on-year increase.

Adicon has returned both its revenue scale and profitability—two core metrics—to a trajectory of positive growth. Next, let us break down the specific performance of each business segment.

First, regarding the specialized testing segment, revenue in the first half of 2026 increased by approximately 11% year-on-year, with its share of total revenue rising to 30%. The compound annual growth rate (CAGR) over the past five years reached 26%, continuing to serve as a key driver for the upgrading of the company's business structure.

Looking at specific product lines, after completing the acquisition of Yuanze Youqing in 2025 and restoring historical data for Youqing, the company's hematology product line still achieved an 18% year-on-year revenue growth in the first half. Meanwhile, product lines in reproductive health, genetics, infectious diseases, maternal and child care, and oncology all demonstrated rapid growth momentum.

Even excluding the consolidated revenue from Yuanze Youqing, the organic growth of the company's original hematology segment reached 28%. This clearly demonstrates the significant value-enhancement effect of the Yuanze Youqing acquisition on the company's own hematology product line.

In terms of quarterly trends, excluding the acquisition of Yuanze Youqing, the organic growth of our specialized testing business gradually recovered from a year-on-year decline in the first half of 2025 to positive growth in the fourth quarter of 2025, and further entered a 9% growth track in the second quarter of the first half of 2026, with growth momentum continuing to strengthen.

Turning to the co-construction segment, revenue in the first half of 2026 approached RMB 200 million, up 17% year-on-year, with its revenue share increasing to 14%. The compound annual growth rate from 2022 to 2025 reached 37%, maintaining a rapid pace of expansion.

At the same time, the value of new orders increased by 114% year-on-year, and revenue from public tertiary hospitals grew by 11% year-on-year, providing ample project reserves to support future revenue growth.

In the first half of the year, the Company continued to deepen strategic cooperation with leading industry players such as Mindray Medical and Jointown Pharmaceutical Group, thereby strengthening its comprehensive competitiveness in co-built sectors. With the ongoing advancement of county-level medical consortiums and the continuous release of policy dividends, we believe that the co-construction business still holds significant growth potential and will become a key driver of the Company's performance growth.

Regarding the CRO business, in the first half of 2026, the Company's CRO revenue increased by 35% year-over-year, with the value of new orders nearly doubling. Meanwhile, the Company signed a framework agreement for strategic cooperation with Gan & Lee Pharmaceuticals, a leader in innovative drugs, further deepening collaboration in the CRO sector.

Turning to routine testing, revenue grew by 0.1% year-over-year in the first half of 2026. Amidst persistent pricing pressure in the industry, Aidikang achieved positive growth against the trend, taking the lead.

Judging from the year-over-year trend in sample volumes, benefited by the gradual increase in the industry's outsourcing rate and the Company's rising market share, the total sample volume of our laboratories continued to accelerate, effectively offsetting the impact of price declines. We believe the testing industry is showing positive signs of stabilization and recovery.

In terms of health check-up services, revenue decreased by 45% year-over-year in the first half, primarily due to the overall industry environment and proactive adjustments to the customer structure. Going forward, the Company will continue to optimize its customer portfolio to further enhance the quality and sustainability of business development.

Overall, the routine testing business is gradually bottoming out, while specialized testing and co-construction partnerships are seeing sustained momentum in growth. The CRO business has maintained rapid expansion, demonstrating strong operational capabilities within the broader industry.

Public tendering has become a crucial channel for the Company to acquire high-quality public healthcare clients and secure incremental projects. In the first half of the year, the Company continuously improved its tendering system, achieving a total winning bid amount of RMB 690 million, a 100% year-over-year increase, effectively doubling the business volume.

The coverage rate of market opportunities reached 72%, an increase of 22 percentage points year-over-year, while the number of market opportunities participated in grew by 146% year-over-year. This indicates a further enhancement in our ability to cover and engage with high-quality projects.

Meanwhile, the retention rate for top-tier clients reached 95.8%, reflecting strengthened customer stickiness. In terms of customer structure, winning bids from Tier-3 hospitals increased by 25% year-over-year, and those from Tier-2 hospitals rose by 19% year-over-year, indicating that the Company's penetration rate among high-quality public medical institutions continues to rise.

In the first half of the year, the Company made positive progress in both expanding incremental projects and maintaining existing clients, laying a solid foundation for continued revenue growth and optimization of the customer structure.

Operational efficiency has always been a key competitive advantage for Aidikang. Aidikang is the only listed independent clinical laboratory (ICL) in the industry fully managed by professional executives. This governance structure has given us unique advantages in refined operations and cost control.

In the first half of 2026, reagent procurement costs decreased by 12% year-over-year, and the cost per logistics order dropped by 9% year-over-year. In terms of efficiency, labor productivity in laboratories increased by 15% year-over-year. These initiatives collectively drove the gross margin up to 37.9%, an increase of 2.1 percentage points year-over-year, while the adjusted net profit margin rose to 4%.

Regarding quality management, we continue to strengthen our professional capabilities. The total number of items accredited under ISO 15189 reached 467, ranking first in the industry. A total of 25 laboratories have obtained ISO 15189 accreditation, and the number of laboratories with triple-system certification increased by one compared to 2025, reaching 18.

We firmly believe that cost reduction and efficiency improvement should not come at the expense of quality. A stable and standardized quality system is not only the foundation of our customer service but also a crucial guarantee for the company's continued business expansion.

While continuously strengthening our internal capabilities, the company is actively deepening cooperation with leading enterprises in the industrial chain in the area of co-construction, achieving a closed-loop ecosystem. Since 2026, the company has established strategic partnerships with Mindray Medical, Jointown Pharmaceutical, and Haier Biomedical, effectively integrating various links in co-construction to build a more complete and efficient collaborative service system.

AI and digitalization are key drivers for the company to enhance diagnostic efficiency, service value, and operational quality. In terms of technical collaboration, the company has engaged in deep partnerships with Huawei and Digital China, jointly exploring multi-modal large models in healthcare, and independently developed the 'Wenyi' vertical medical large model. This model has already been applied in scenarios such as pathological slide reading and flow cytometry analysis.

In the area of smart regional testing, the company empowers the construction of regional testing centers with AI capabilities, combining its national logistics network, over 4,000 testing capabilities, and self-developed large models to improve the efficiency and standardization level of regional testing.

Meanwhile, the company is actively integrating into the big health ecosystems of leading platforms, embedding its professional testing capabilities into health management and user service scenarios, and exploring replicable and sustainable models for ecosystem collaboration.

Next, I will introduce the company's progress in its digitalization strategy. In the first half of 2026, the company's 'AI + Testing' initiative has gradually moved from isolated applications to systematic implementation. Currently, we have launched more than ten intelligent applications focusing on smart testing, regional coordination, and data assets.

First, let's look at smart testing on the left. AI has gradually been embedded into the core processes of testing and pathology businesses. Taking the LIMS smart review system as an example, it now covers over 700 routine clinical laboratory items. As of July, the auxiliary review approval rate reached 85%, review efficiency improved by 15%, and the time required to issue reports was effectively shortened.

In the area of AI-assisted pathological diagnosis, the company has cumulatively processed over 15 million cases with AI assistance, with an annual volume exceeding 4.7 million cases and an AI penetration rate of 89%. The application of AI has not only enhanced processing capacity but also led to continuous improvements in diagnostic quality.

Furthermore, the AI quality control system analyzes an average of 126,000 cases per month and has intercepted over 8,000 abnormal reports, helping us further improve diagnostic accuracy.

Let's look at regional coordination in the middle section. We have addressed the issues of cross-institutional sample transfer and information interoperability through the 'One Code Pass' system and regional Laboratory Information Management Systems (LIMS). Since the launch of the One Code Pass, sample reception efficiency has improved by more than 50%. The regional LIMS further enables unified testing, unified quality control, and mutual recognition of reports within the region.

We currently serve 14 regions, covering hundreds of primary healthcare institutions. A single regional inspection center platform can process over 3,000 test reports daily. Through this digital ecosystem, we are effectively bridging the 'last mile' for regional inspections.

Finally, let's examine the data assets on the right. The company has accumulated over 20 PB of multimodal, multi-omics medical laboratory data and has established a private medical big data platform. We have formed multiple high-quality medical datasets and completed our first transaction of AI training datasets, marking the transition of data assets from accumulation to monetization.

Currently, relevant datasets are being listed and rights-certified on multiple data exchanges. For Adicon, digitization is not merely about system upgrades; more importantly, it involves truly converting digital capabilities into higher testing efficiency, more stable quality control, and more sustainable data value.

The above summarizes the company's key operational progress in the first half of the year. Next, please welcome our Chief Financial Officer, Larry, to present the financial performance.

Larry

Thank you, Mr. Le Gang. I will now present the financial highlights. But before we begin, I would like to review our journey over the past few years.

Back in 2019, we achieved revenue of slightly over RMB 1.7 billion. Since then, our revenue has grown by 53%, while our gross profit has increased by more than 89%.

However, during this period, we also felt the impact of various macroeconomic factors, including COVID-19, the post-pandemic recovery, the anti-corruption campaign, budgetary pressures on assessments, and policies such as Volume-Based Procurement (VBP) and Diagnosis-Intervention Packet (DIP). All of these have triggered a new round of industry consolidation and introduced fresh pricing pressure.

As mentioned in our last conference call, we observed quarter-over-quarter improvements throughout last year, a trend that has continued into this year. I am pleased to report that sustained industry improvement in the first half of this year has returned us to a trajectory of positive total revenue growth.

We continue to strive to optimize our cost structure and have streamlined our overall laboratory network. As part of our lab optimization initiative, we closed three laboratories over the past 18 months. Following the acquisition of RenDe Youqing, we currently operate 35 laboratories.

Meanwhile, we continue to invest in niche segments that accelerate future growth. Turning to performance highlights, we achieved total revenue of RMB 1.28 billion in the first half of 2026, representing a 1.1% increase compared to the first half of 2025.

However, excluding distribution revenue, which accounts for less than 4% of our total revenue, our core Independent Clinical Laboratory (ICL) revenue grew by 2.6% year-over-year. Despite continuing to face reimbursement-related pricing pressure in the first half of the year, we achieved double-digit volume growth in our ICL business, thereby delivering positive revenue growth.

We witnessed a moderation in the year-over-year decline in Average Selling Price (ASP), which narrowed from over 10% last year to the mid-to-high single digits in the first half of 2026. Volume growth continued to improve in the first half of this year, bringing both our ICL and total revenue back into positive growth territory.

We believe that pricing pressure will continue to ease as we enter the second half of the year, with pricing dynamics reverting to more typical seasonal patterns.

As shown in the chart in the upper right corner, we achieved gross profit of RMB 487 million in the first half of this year, an overall increase of 7.2%. Our gross margin reached 37.9%, representing a year-over-year expansion of 250 basis points.

From a longer-term perspective, the company's gross margin has improved by nearly 800 basis points compared to the 30.1% recorded in 2019. The significant improvement in gross margin this year is primarily driven by two factors:

First, our operating leverage has improved due to the return of overall growth and revenue expansion. Second, productivity gains from cost reductions and efficiency improvements implemented over the past few years are now clearly translating into financial results.

We anticipate further improvement in revenue growth this year. We observed that positive trends continued into the third quarter, and we indeed expect our gross margin to improve as new business lines and co-built laboratories grow and contribute.

As shown in the chart at the bottom left of the page, we achieved an adjusted EBITDA of RMB 184 million in the first half of this year, representing an 11.7% year-over-year increase from RMB 164 million in the same period last year.

In terms of margins, our adjusted EBITDA margin stood at 14.3%, an improvement of 130 basis points compared to the same period last year.

At the bottom left of the page, we reported an adjusted net profit of RMB 151 million, a 19.6% year-over-year increase from RMB 43 million in the same period last year. Our adjusted net profit margin reached 4%, an improvement of 60 basis points compared to the same period last year.

We are pleased to report that both the top and bottom lines of our income statement have returned to a growth trajectory in the first half of this year. With significant improvements in operating leverage, gross margin, EBITDA, and net profit margin, we are finally seeing the benefits of the operational enhancements implemented over the past few years.

From our AI initiatives to cost controls in personnel and procurement, we believe our currently optimized cost structure is well-positioned to leverage our turnaround for positive operating leverage gains, and we expect to see further improvements as we move forward.

Over the past two years, anticipating the challenges of managing our cost structure in a challenging macroeconomic environment, we implemented significant cost-cutting efforts and efficiency improvements.

However, during this period, we also pivoted to invest in our future growth, including the recently completed acquisition of Rende Youqing, new expansions in our co-building efforts, and the ongoing development of our specialized test menu.

As we navigate through the difficult year of 2025, these investments and efficiency improvements have enabled us to capitalize on the return to growth earlier than our peers. We expect to continue leading the industry this year as the macroeconomic environment continues to improve.

Our focus on operational efficiency is also reflected in the overall change in our headcount. Since the end of 2019, our total employee count has increased moderately by 678 people, or approximately 15%, while our revenue grew by over 50% and our sample volume increased by more than 75% during the same period.

Furthermore, since late 2019, we have made concerted efforts to invest in growth, as evidenced by a 25% increase in our R&D headcount over the past six years, adding 75 additional R&D personnel.

Our sales and marketing expenses increased by 7.4% year-over-year, with the sales and marketing margin standing at 16.4%, an improvement of approximately 96 basis points compared to the same period last year. This growth in sales and marketing was driven by the expansion of our specialized testing sales team and increased coverage efforts in specialized testing.

We expect this margin to remain within the 16% to 17% range as we continue to increase contributions from specialized testing. General and administrative expenses rose by 15.6% year-over-year, primarily due to recent acquisitions and integration costs associated with Rende Friendship.

We have continued to build out our IT-related investments, including upgrades to our LIMS and PIMS systems, as well as investments in our AI-ready data management infrastructure. Consequently, our overall general and administrative expense margin for the first half of 2026 was 10.1%, an increase of 127 basis points year-over-year. We do anticipate further improvements as we move forward.

Regarding working capital, we have continued to strive to improve our working capital metrics over the past few years, despite macroeconomic challenges. The general economic environment, combined with budgetary pressures on our COVID screening customers from previous years and our current client base, has led to longer payment cycles. This phenomenon is quite common across the industry.

We have implemented numerous credit control measures and continue to prioritize this area this year. We are encouraged that recent government policies have recognized these budget constraints and have made specific efforts to shorten the reimbursement cycle for government insurance programs, with the hope of improving payment cycles across the industry.

We are seeing improvements among large hospital clients and public hospitals, while some of our smaller private hospitals continue to face cash flow challenges. This year, we have renewed our focus on customer creditworthiness and credit history, and we believe our efforts will lead to improved working capital metrics.

Given the significant seasonality of working capital, all our comparisons are made on a year-over-year basis. For inventory, absolute inventory levels decreased by 5.1% in the first half of this year compared to the first half of last year. However, our days inventory outstanding remained relatively stable at 27 days in the first half of this year, unchanged from the same period last year.

The company rationalized its suppliers and SKUs last year, and we expect to see further improvement in days inventory outstanding.

For accounts receivable, total accounts receivable increased by 3% from the end of the first half of last year to the end of the first half of 2026. However, on a net basis, we saw a year-over-year decrease of 7.5%.

Our Days Sales Outstanding (DSO) increased from 233 days to 251 days. However, excluding our large-scale COVID-19 screening clients, our DSO stood at 238 days in the first half of 2026, compared to 208 days in the same period last year.

As shown in the small table at the top of the chart, we had over RMB 500 million in receivables from large-scale COVID-19 screening at the end of 2023. This has now decreased to RMB 211 million, representing a reduction of more than RMB 290 million.

Of this RMB 290 million reduction, we actually collected over RMB 280 million, with less than RMB 10 million written off. Consequently, moving forward, we maintain a robust Expected Credit Loss (ECL) provision of RMB 166 million for these COVID-19 receivables, covering more than 80% of the total COVID-19 screening receivables.

Regarding our Days Payable Outstanding (DPO), payables decreased by 7.5% from the end of the first half of 2025 to the end of the first half of this year. Our DPO decreased from 156 days in the same period last year to 151 days.

As we optimize our supplier network and procurement SKUs, we expect our DPO to remain at roughly the same level.

Finally, our conservative provisioning for Expected Credit Losses is shown in the bottom right corner. We have an ECL allowance of RMB 426 million against our receivables, representing a 4% increase from the end of 2025 and a 10% year-on-year increase. This accounts for more than 23% of our total receivables, and we believe we have taken a comfortable and conservative stance on our ECL provisions.

On the income statement, just a few items to note: Our other income grew by 39% year-on-year, primarily attributed to a one-time gain of approximately RMB 3 million from the disposal of right-of-use assets, and a RMB 1 million increase in government grant income.

Our other expenses decreased by 23% year-on-year. This was mainly due to a reduction in Expected Credit Loss provisions compared to the same period last year. We also experienced lower foreign exchange losses of approximately RMB 2.6 million, as the company internally changed its functional currency to better align with our consolidated accounts.

Therefore, we expect foreign exchange gains and losses related to assets to be less significant in the future. Our finance costs increased by 5.8% year-on-year, primarily due to additional interest expenses arising from acquisition debt assumed as part of the Rende Youqing acquisition.

Regarding Adjusted EBITDA, we provide a full reconciliation from our audited financial figures to the Adjusted EBITDA figures, which we consider a more useful representation of our true operating earnings. Accordingly, we have provided detailed information and historical year-on-year comparisons.

Our adjusted net profit follows a similar adjustment logic to adjusted EBITDA. As you can see here, many of the adjustments are identical. These are calculated on a tax-effected basis; however, since most of these items are non-operating in nature, they generally have no tax impact.

Therefore, the figures remain consistent with those on the previous slide. An additional item for the first half of 2026 on this slide is a one-time income tax expense of approximately RMB 5.6 million incurred at a former subsidiary level, which has been adjusted out.

Regarding our balance sheet, I would like to reiterate the position as of June 30. Please note that our cash balance includes a significant amount of pledged cash deposits. Therefore, when reviewing our cash figures, net debt, or net cash positions, it is essential to include these pledged deposits.

On a year-over-year basis, our total cash actually increased by 2.9%, driven by seasonal working capital fluctuations. In this business, it is indeed necessary to compare certain metrics on a year-over-year basis.

This concludes our prepared remarks. We will now hand over the microphone to our moderator for the subsequent Q&A session.

Wang Legang

Thank you, Larry, for your insights. We believe 2026 is poised to be a turning point for the ICL industry, marking a bottoming-out and subsequent recovery. The company's revenue and profits have returned to positive growth, and we are confident in our ability to continue leading the industry's growth trajectory.

Looking ahead, Adicon will remain grounded while focusing on long-term development. As the cornerstone of the company's growth, the routine testing segment will continue to deepen customer acquisition and retention, solidifying the foundation for growth. The specialized testing segment will anchor on medical value, driving rapid growth through major projects.

The CRO segment will seize industry opportunities to accelerate business expansion and contract signings. Benefiting from policy dividends associated with regional laboratory centers, the co-construction segment will become the most significant driver of the company's revenue growth.

Meanwhile, the company will enhance efficiency and synergy through AI and digitalization, refined operations, and prudent M&A activities, thereby creating long-term value for shareholders. Additionally, the company will leverage M&A integration as a growth engine, absorbing high-quality resources to accelerate the integration and synergy across all business segments.

Amid the current complex and volatile market environment, Adicon remains firmly confident in the medium-to-long-term prospects of the industry. We are actively positioning ourselves in sectors with growth potential, striving to achieve breakthrough development while consolidating our existing business.

We will now open the floor for your questions and comments. Thank you all.

Host

Thank you to leadership for the sharing session. We will now move to the interactive Q&A segment. Investors are welcome to raise their hands for voice interaction or submit text questions. For participants joining via phone, please press the * key followed by the number 1 to ask a question. For online participants, you may type your questions in the live chat area or click the 'Raise Hand' button to request voice participation.

We now invite our colleague from Morgan Stanley to ask a question. Please go ahead. Thank you.

Alexis (Morgan Stanley)

Hello, can the management team hear me? I am Alexis. Thank you very much for the detailed presentation. It is also encouraging to see that the ICL industry returned to positive growth in the first half of this year.

I have two questions. The first relates to the industry. Can we interpret that the impacts of previous policies, including centralized procurement and unbundling of test packages, have been largely absorbed? Looking ahead, how do you view the impact of the testing price adjustment policy recently issued in August on future industry pricing and competitive landscape? That is my first question.

The second question concerns our profit margins. We have observed that our gross margin continues to rise and is actually higher than that of our peers, despite our overall business scale being slightly smaller. We would like to better understand the reasons behind this, as well as the outlook for future gross margins.

Wang Legang

Thank you to our colleague from Morgan Stanley. I am Wang Legang, CEO of Adicon. I will attempt to answer these two questions.

First, regarding the impact of unbundling service packages, I believe there was a minor effect in the first half of the year, leading to some downward pressure on overall pricing. However, the situation is still much better than before. From our performance results, we can see that the growth in our sample volume has fully offset this price decline.

Therefore, in terms of total sales volume, Adicon is leading the pack. Since several competitors have also released their public financial reports, we appear to be one of the few companies that achieved solid year-on-year sales growth in the first half of the year. So, while there was an impact, it was relatively small, and we have been able to offset it through the increase in sample volume.

Secondly, regarding the policy guidelines for test item approval, there has been extensive research recently. In the short term, although there are pricing guidelines, we believe the impact on this year will be very limited given the current pace of implementation. Execution may roll out across various provincial capitals next year, meaning the full effect might not be realized until throughout next year.

For our company, as you know, Adicon is based in Hangzhou, and Zhejiang Province itself is already a low-price region for independent clinical laboratories (ICLs) nationwide. We believe that the price changes brought about by these approval guidelines will have a relatively smaller impact on our company compared to our peers.

Additionally, I think the most important point is that, looking at the public financial reports of leading listed companies, even during the periods of greatest industry pressure in the previous two years, Adicon maintained a unique position of profitability within the sector.

This demonstrates Adicon's strong capability in refined operations. Therefore, I personally believe that even if prices continue to decline slightly, affecting the industry as a whole, it is actually a medium-to-long-term positive for Adicon.

Consider the business logic: if loss-making companies face continuous price declines, their future will be challenging. However, Adicon, as the company with the best operational capabilities among industry leaders, is poised to see its market share grow more rapidly in the future.

Thus, for Adicon, I believe the medium-to-long-term outlook is positive, including the impact of the test item approval guidelines. There are many favorable factors for specialized testing and high-value medical diagnostics, which aligns precisely with Adicon's strategic direction.

Overall, I personally believe that the test item approval guidelines represent a significant medium-to-long-term benefit for Adicon and will accelerate industry consolidation.

The second question concerns gross margin. Adicon's gross margin increased by another 2.1 percentage points year-on-year in the first half of 2026. I believe this is a strong achievement delivered under difficult circumstances.

As evident from the publicly available financial reports, Adicon's share of specialized testing business is actually lower compared to the top two industry leaders. Despite this, given that specialized testing generally carries higher gross margins, our company has maintained strict control over internal expenses through intensive operational management.

I have always emphasized that Adicon is the only leading enterprise in the industry fully managed by a team of professional managers. I believe our professionalized and systematic operational capabilities are superior, a point that has been validated by our operational results over the past few years.

Therefore, our future strategic direction will not only leverage our internal operational efficiency advantages but also continue to focus on specialized testing, precision centers, and regional testing. I am confident that these strategic initiatives will sustainably contribute to margin expansion.

Thus, I am very confident that Adicon can maintain a leading gross margin level within the industry. Thank you; these are my personal views.

Alexis (Morgan Stanley)

Thank you very much. I have no further questions at this moment and will yield the floor to other colleagues.

Host

Thank you for the answers. Next, we invite representatives from CITIC Securities to ask their questions. Please proceed. Thank you.

Mr. Zhang (CITIC Securities)

Apologies, I didn't catch the question clearly. Is it audible now? Much better. I have just one question: Could Mr. Le Gang or Mr. Larry please share the revenue growth rates for the first two quarters? We are looking to assess the trend.

Additionally, could management break down the data by sample volume and average selling price per customer? Our underlying intention is to understand the drivers of recovery and determine whether the industry inflection point has arrived. Something along those lines. Can you hear me?

Wang Legang

Let me add a brief clarification. From the perspective of test volume, we have actually achieved double-digit growth, with an increase of over 10%. Although there has been some price decline, which offset part of the growth, our overall business still expanded, as evidenced by the data.

The previous question concerned the growth rates for Q1 and Q2. Broadly speaking, if we look at monthly figures, we already reached break-even in December 2025. Therefore, the overall results are quite positive.

In Q1, since our company also has a small IVD (In Vitro Diagnostics) business, the combined growth rate was slightly negative, ranging between -1.5% and -2%. In Q2, we achieved a growth rate of approximately 3.5%.

Larry’s earlier comment was accurate; we are in a phase of continuous ramp-up. Viewing it this way, Q1 growth was around -1.6%, rising to 3.5% in Q2, and we expect to approach double-digit growth trends in July and August.

Therefore, the trend is very promising. It is worth noting that the data I mentioned includes a small portion of IVD revenue. If we consider pure ICL (Independent Clinical Laboratory) revenue alone, the performance would appear even stronger.

Teacher Zhang (CITIC Securities)

Thank you, Mr. Legang, and thank you, Mr. Larry. I also feel that this industry is reaching its inflection point and will attract more attention in the future. I have no further questions. Thank you.

Host

Thank you for the sharing, leadership. We now invite analysts from Industrial Securities to ask questions. Please proceed. Thank you.

Industrial Securities Analyst

Thank you, moderator. I appreciate management giving me this opportunity to ask a question. I have a few questions for the leadership team.

First, our company currently operates an Independent Clinical Laboratory (ICL) business and has expanded into the CXO sector. We are also aware that Adicon holds substantial database reserves. Could you please share how the company views the industry opportunities brought by 'AI for Science'? Specifically, what position does our company aim to occupy in this landscape? Thank you.

Wang Legang

I will address the first question. Recently, there has been significant attention on 'AI for Science,' including notable Phase III clinical progress in personalized cancer vaccines.

Personally, I believe that as long as there is a boom in innovative drugs, the CXO business will inevitably see strong growth. Given the promising progress in mRNA vaccines, I anticipate a large-scale surge in this field in the near future.

If innovative drugs in this sector experience a boom, it will certainly drive a corresponding surge in CXO services, given the clear supply chain linkage. Therefore, I would like to focus on the strategic layout and benefits for our ICL business, specifically Adicon, in this context.

There are several key points. First, vaccine preparation necessarily involves related testing. For Adicon, thanks to strategic partnerships with companies like Gan & Lee Pharmaceuticals, we have already established a complete workflow for cancer detection and analysis. Consequently, we are fully capable of handling testing related to vaccine preparation.

I am confident that we have the capacity to handle demand when innovative mRNA drugs surge. Second, the vaccine production stage also requires relevant inspection and testing. With mature platforms such as digital PCR, we are fully equipped to perform precise quantification of specific immune responses following mRNA vaccine administration.

Third, post-vaccination efficacy monitoring is essential. Leveraging our existing technical capabilities, Adicon is well-positioned to rapidly establish customized workflows for Minimal Residual Disease (MRD) detection and monitoring of the tumor immune microenvironment.

I believe that as long as companies involved in these innovative drugs, such as Moderna or others, experience business growth, demand for these services will exist. Adicon is fully prepared to capture this business opportunity.

Therefore, I believe this represents an opportunity not only for Aidikang but also for the industry as a whole. What I particularly want to emphasize is that underlying these developments is the inevitable formation of substantial data assets.

Aidikang was established relatively early, in 2004. Over the years, we have invested significantly in AI and data assets. We have accumulated data on the scale of 20 petabytes (PB).

We are continuing to build and refine our database with the aim of leveraging this data to generate high-quality datasets that can support scientific research and AI training for pharmaceutical companies.

In the emerging 'AI for Science' track for innovative drug development, incorporating such projects will allow us to accumulate more valuable data assets. I believe this will yield significant benefits for Aidikang's future, the expansion of our CXO business, pharmaceutical companies, and the industry at large. This is my personal perspective. Thank you.

Analyst, Industrial Securities

Thank you, management. I have a second question. We are observing an increasing number of regional inspection centers being established. While this may be a recurring question, I would like to ask: compared to Independent Clinical Laboratories (ICLs), how do the two models of regional inspections—internal testing versus outsourced testing—compare in terms of profitability, collection periods, and the roles ICLs can play?

Furthermore, to what extent will regional inspections become the mainstream model in the future? That is my second question. Thank you, management.

Wang Legang

First, I will address the last question regarding whether regional inspections will become mainstream in the future. Personally, I believe that regional inspections will indeed become a dominant model.

In China, policy direction is crucial. Aligning our business operations with policy guidance is, I believe, a vital strategic choice for any enterprise.

For Aidikang, regional laboratory testing is our most critical core strategic objective for the next three to five years. The underlying policy framework is well-known: it aligns with the 'Thousand Counties Project,' which aims to build medical consortiums and establish five major centers.

The 'Thousand Counties Project' is indeed its name. However, I believe the national initiative will not stop after merely covering one thousand counties. For instance, Aidikang signed an agreement in April or May of this year to establish a regional testing center in Xianning City, Wuhan. This is likely the first municipal-level regional testing center in the country.

It is not limited to counties; I believe this successful model will gradually expand to cities as well. The benefits are evident. Previously, the pain points were that smaller entities, such as community clinics, private hospitals, or small-scale hospitals, lacked sufficient testing capabilities, and their results were not mutually recognized.

I believe this represents a crucial national strategy or lever to address these issues. We consider regional laboratory testing to become a significant mainstream business segment in the future.

Our focus is on the profitability and payment collection cycles of regional testing versus external referral models, as well as the role played by Independent Clinical Laboratories (ICLs). Those familiar with the industry know that traditional regional testing often involved equipment placement or centralized procurement of equipment and consumables.

Currently, there is a gradual shift towards service-oriented operations, establishing truly state-recognized regional testing centers. This requires substantial operational capabilities, including laboratory construction, compliance with ISO 15189 standards, and refined operational management to achieve both cost efficiency and high-quality test results.

We are witnessing a clear transition toward this model. In this context, ICL companies like us provide operational service capabilities that traditional distributors and even some In Vitro Diagnostics (IVD) companies lack. This defines our key role.

Regarding profitability, Aidikang secured seven regional testing centers in the first half of this year, backed by detailed financial projections. Currently, we observe that profitability in this segment is superior to that of standard testing or routine clinical external referrals.

In terms of payment collection, besides better profitability, the contracts for regional testing centers are typically locked in for three to five years, or even longer. In contrast, clinical external referral contracts usually last one to two years, with a maximum term of around two to three years.

Clearly, regional testing offers stronger customer stickiness through improved profitability and longer contract lock-in periods. Regarding payment cycles, frankly speaking, some regional testing centers or public hospitals may have payment terms of six months or potentially longer.

Relatively speaking, some private healthcare systems may have payment cycles of around three months. In terms of collection periods, district inspection centers or public hospitals might be slightly longer than private institutions. However, we need to look at this from the opposite perspective. Although private medical institutions or those with weaker operational performance have shorter payment terms, their repayment capacity is often lower, and the risk of future bad debts is significantly higher compared to public hospitals and district inspection centers supported by national policies.

From this perspective, I believe that large public hospitals, whether operating precision medicine centers or district inspection centers, have far stronger risk resistance capabilities than ordinary private hospitals.

Based on this, Aidikang will prioritize district inspection centers as a core strategic direction for the future. Thank you.

Industrial Securities Analyst

Understood, thank you, management. I have no further questions. I will hand the time back to the moderator. Thank you for your answers.

Host

Next, we invite the analyst from Jefferies to ask questions. Please go ahead.

David (Jefferies)

Hello, management. I have two questions. First, could you please provide some commentary on the changes in testing volume during the first half of this year? Second, what were the reasons for the days sales outstanding (DSO) and the increase in credit impairment losses for the company in the first half of this year? Thank you.

Wang Legang

Regarding the first question, I actually mentioned a figure when the previous analyst asked. From Aidikang's perspective, our sample volume overall saw double-digit growth in the first half, exceeding 10%.

I have also observed that many competitors are generally hovering around six. I would like to reiterate that, based on this data, we believe the current measures—whether it was last year's DIP-based medical insurance cost containment or volume-based procurement (VBP)—have indeed accelerated the increase in the rate of tests outsourced by hospitals.

From this perspective, I believe the growth in specimen volume for both our company and our peers demonstrates the industry's recovery. That is roughly the situation. Larry, could you please take the next question?

Larry

Hey David, our business is seasonal, right? So, at mid-year, we actually have high levels of working capital and peak accounts receivable. Therefore, when you see an increase, you are likely comparing it to the end of last year, specifically the end of 2025.

Thus, we actually need to make a year-over-year comparison. If you compare it to the middle of last year, or June 30, 2025, we are actually down. Our accounts receivable decreased by approximately 7.5% year-over-year.

We saw an increase from year-end, but that was due to our typical seasonality. Last year, as of June 30, 2025, our days payable outstanding (DPO) also decreased year-over-year. For the first half of 2026, it was 192 days, down from 209 days in the first half of 2025.

Please let me know if this answers your question.

David (Jefferies)

Thank you very much. Thank you, executives.

Host

Thank you for sharing. We now invite the analyst from China Securities Co., Ltd. to speak. Please go ahead with your question. Thank you.

CSC Financial Analyst

Good day, executives. I am an analyst from CSC Financial. I have two brief questions to ask. First, as mentioned earlier by the leadership, regarding the partnership with Guardian Health, could you elaborate on the current cooperation model? Will this collaboration be further deepened in the future, and if so, in what form? That is my first question.

Larry

Regarding Guardian Health, this is a 20-year partnership. We have an exclusive partnership with them for Sino Biopharm's business in China, and we hold a right of first refusal on other businesses should they decide to enter the Chinese market.

Since we signed the partnership agreement in 2022, it has actually performed very well. We spent 18 months on technology transfer for the first three products. We have Guardian Lynx, their FDA-approved small-panel genomic profiling assay.

We also completed the technology transfer for their large-panel product, called Guardian Omni. Additionally, we have a product called Guardian Response, which measures ctDNA levels to assess treatment response.

We began receiving samples in early 2024, and we saw strong growth in 2025, with year-over-year growth exceeding 30%. Customer demand has also been robust. Our customer pipeline and order backlog continue to grow strongly.

Over the past 12 months, we even signed three domestic clients. Typically, one might expect such products to be more suitable for multinational biopharmaceutical companies conducting global clinical trials.

However, we have actually seen very strong demand growth from domestic clients, as I believe people recognize the significant value of the globally validated assays provided by Guardian for their data generation. This is particularly important given the trend toward out-licensing and the need for data validation to support out-licensing revenue.

Therefore, we are very satisfied with the partnership. We are also actively discussing ways to further expand the collaboration with them. Consequently, we expect the partnership to continue and grow.

CSC Financial Analyst

Understood. My second question is: Could management please provide an update on the current progress of our acquisition of Genon?

Larry

The acquisition of Genon is taking longer than initially expected, and the process is still ongoing. Unfortunately, we have not yet closed the deal. As the acquisition has not been completed, we have not undertaken any integration with Genon.

However, our original plan for the acquisition was to create a new, more independent operating unit within Adicon. Since Genon's business is almost entirely preclinical, it represents a new growth pillar for us, rather than being easily integrated directly into Adicon's core operations, as was the case with Rende Youqing.

Therefore, unfortunately, we do not have any updates at this time.

Host

Next, we invite analysts from Kaiyuan Securities to ask questions. Please proceed.

Shi Xizheng (Kaiyuan Securities)

Thank you for the opportunity to ask a question. I am Shi Xizheng from Kaiyuan Securities. I would like to ask management: From an overall perspective, how has the market share in the ICL (Independent Clinical Laboratory) sector changed recently? Additionally, are there any signs of accelerated consolidation or exit among small and medium-sized enterprises in the industry? Thank you.

Wang Legang

Mr. Shi, let me briefly address these two questions. Regarding market share, although there is no official data for the ICL industry, simple mathematical logic suggests that Adicon has maintained the highest growth rate in the industry, both during last year's period of pressure and in the first half of this year.

From this perspective, we are continuously gaining market share. Based on our internal calculations aggregating the shares of the top players, Adicon's current market share is steadily increasing.

This is a straightforward inference from publicly available data. Regarding the second question on whether smaller and mid-sized ICL companies are showing signs of accelerated exit, I will discuss this from both practical observation and business logic perspectives.

First, from a practical standpoint, there has been a noticeable increase in companies approaching us for collaboration. Additionally, during our M&A processes, we have observed valuations for many small and medium-sized enterprises continuing to decline.

Therefore, from this observational perspective, it is evident that many small and mid-sized ICL companies are indeed accelerating their exit from the market.

Second, from a business logic perspective, even the largest leading companies incurred losses last year and the year before, let alone smaller and mid-sized firms. No company can sustain losses indefinitely.

Although there are signs of recovery this year, competitive pressure on pricing remains intense. In this environment, I believe that apart from leading companies like ours with pricing advantages, scale benefits, and strong operational capabilities, small and mid-sized enterprises are still facing relatively difficult survival conditions.

Thus, from a business logic standpoint, the current state of small and mid-sized enterprises will inevitably lead to an accelerated exit. These are my thoughts shared with you, Mr. Shi, from these two simple perspectives.

Shi Xizheng (Kaiyuan Securities)

Understood. Thank you, Mr. Wang, for your detailed and patient answers. We wish the company continued success. Thank you.

Host

Thank you for the sharing. Due to time constraints, we will now move to the final questioner. We invite the representative from China Merchants International to ask their question. Please proceed.

China Merchants International Analyst

Good day, management team. I have two brief questions. First, we have observed impressive growth in our co-construction business. My understanding is that orders of this nature typically involve a relatively long construction and ramp-up period.

Could you provide an outlook on future revenue visibility based on the current status of signed orders in hand and the average revenue scale per order? That is my first question.

Wang Legang

Hello, Adicon. This year, we have been closely monitoring the construction of district inspection centers, a point I have repeatedly emphasized. Based on my personal understanding and interactions with management, we view district inspection centers as a strategic time window. National policies aim to complete the 'Thousand Counties Project' between 2025 and 2027.

Therefore, we treat this as a critical window to rapidly capture market share and serve this segment. Looking at our orders from the first half of the year, we secured contracts with seven district inspection centers, totaling approximately RMB 160 million.

Regarding the construction cycle you mentioned earlier, our internal assessment indicates that the typical construction period ranges from three to six months. Variations arise due to differing regional interpretations and efficiency levels. Internally, we are consistently accelerating processes and compressing timelines.

We are also implementing strict management over operational cycles and capabilities, aiming to reduce the implementation timeline from three-to-six months down to two-to-three months. Indeed, there are already several cases where delivery and operations commenced within three months.

There is also the issue of coordination and ensuring that operational scaling occurs rapidly. We are learning and adapting as we go. Currently, one notable example is the largest district inspection center in Xianning City, which is among the most advanced in China.

It has taken us approximately three months to commence formal operations. The cooperation model with the Regional Testing Center differs from that of other hospitals, as it effectively consolidates and transfers all specimen testing within the district to us.

Consequently, the volume ramp-up is very rapid due to policy support and the lack of alternative channels. In other words, once the facility is built, the existing volume will switch over to us quickly.

Therefore, regarding regional testing centers, although the construction phase may take slightly longer, we are striving to improve efficiency and shorten this timeline. However, the business volume ramp-up remains very fast; it is a process of switching over existing volume rather than gradual cultivation.

These are some of the operational insights we have gained from our seven regional testing centers in the first half of the year.

CMSC International Analyst

Understood, thank you. My second question is whether management could provide an outlook on the pace of revenue growth for the second half of the year and through 2027. Specifically, can high-growth segments such as our co-built specialized testing business and CRO services further accelerate the company's revenue growth? Thank you.

Wang Legang

Thank you. I would like to share some of our future plans in advance. For Adicon, starting next year, given that we have already achieved positive growth in the first half, we expect even faster growth in the second half. Our target for the second half is to achieve double-digit growth.

We also aim for Adicon to maintain double-digit growth through 2027. We currently hold a significant backlog of contracts for the co-building models you mentioned, including CRO services, where our orders have doubled.

Additionally, our order book for general testing tenders has also doubled. These orders will translate into incremental growth next year. Therefore, our target for Adicon for the second half of this year and for next year is double-digit growth.

China Merchants International Analyst

Alright, thank you. Does Mr. Tang have any further questions? Excellent. Thank you to all investors for your questions and to management for sharing their insights.

Host

We have had a thorough exchange during today's meeting. Now, I would like to invite management to deliver the closing remarks.

Wang Legang

First of all, I would like to thank all the analysts for their attention to Aidikang. Aidikang is a company that began its entrepreneurial journey in 2004. Over the past 22 years, we have witnessed and weathered many challenges, including policy changes.

In the first half of this year, we delivered results that we consider quite satisfactory. Among companies with publicly available financial reports, it is evident that we are one of the few enterprises that achieved positive growth in both revenue scale and profit levels in the first half of the year.

Our confidence stems from our robust order book across all segments, including CRO services, regional laboratory testing, and tender-based project development. Therefore, we have strong confidence in our performance for the second half of this year as well as for next year.

As a company operated entirely by professional managers, our team's mission is to prioritize performance and deliver results that create value for shareholders.

While delivering performance and profit results, our team remains highly diverse. Personally, I have extensive experience in the broader healthcare sector, including digital health, internet healthcare, and the application of large AI models in the medical field.

Beyond delivering these results, we aim to continuously enhance Aidikang's medical value and leverage new technologies such as digitalization and AI. We hope to create value for the industry and contribute more to China's clinical diagnostics sector as well as the broader pharmaceutical and public health causes.

We also extend our sincere gratitude to everyone for their interest in Adicon. We hope you will continue to follow Adicon in the future. We are committed to delivering outstanding results for the industry and all those we serve, whether they are patients requiring care or individuals focused on wellness. Thank you all.

Host

Thank you all for attending this meeting. The meeting is now concluded. We wish you a pleasant life. Goodbye.

More details:ADICON HOLDINGS IR

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