Aurora Spine Corporation ($ASG)

Good day, and welcome to the Aurora Spine First Quarter Fiscal Year 2026 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adam Lowensteiner, Vice President of Lytham Partners. Please go ahead.

Thank you, Dave, and thanks, everyone, for your patience. Sorry for the delay. Welcome, and thank you for joining us today to conduct an update with the investors and review the financial results for Aurora Spine for the first quarter of fiscal year 2026 that ended March 31, 2026. With us on the call representing the company today are Trent Northcutt, President and CEO of Aurora Spine; Matt Goldstone, Chief Commercial Officer; and Chad Clouse, Chief Financial Officer of Aurora Spine. Before we begin, I'd like to remind everyone that statements made during the course of this call may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934. These statements reflect current expectations concerning future events and results. Words such as expect, intend, believe, may, will, should, could, anticipate and similar expressions are words that are used to identify forward-looking statements. Further absence does not mean a statement is not forward-looking. These statements are not guarantees of future performance and are subject to risks and uncertainties and other important factors that could cause actual performance or achievements to be materially different from those projected. For a full discussion of these risks, uncertainties and factors, you are encouraged to read Aurora Spine's documents on file with SEDAR, including those set forth in periodic reports filed under the forward-looking statements and Risk Factors section. Aurora Spine does not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. On this call, management may refer to EBITDAC, adjusted EBITDAC, adjusted net income and adjusted EPS, which are not measures of financial performance under generally accepted accounting principles or GAAP. Management believes that these non-GAAP figures in addition to other GAAP measures provide meaningful supplemental information regarding the company's operational performance. Investors should recognize that these non-GAAP figures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to and not as a substitute for or superior to any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures in accordance with SEC regulations can be found in the company's earnings release. With that, I'd like to now turn the call over to Mr. Trent Northcutt, President and CEO of Aurora Spine. Trent, please proceed.

Thank you, Adam. I'd like to welcome everyone to this call to update everyone about Aurora Spine. To lay out the agenda for today's call, I plan on updating everyone on the company's operations and then hand the call over to Matt Goldstone, our Chief Commercialization Officer, to review our sales initiatives. After Matt makes his remarks, I will pass the call to Chad Claus, our Chief Financial Officer, who will then briefly review the company's financials. Afterwards, we will have some brief concluding remarks and then open to the call to answer any questions you may have. My remarks will be brief as we've only been a few weeks since our last conference call. The first quarter results showed some positives despite slower-than-anticipated start to the fiscal year. Some of the sluggishness early in the quarter were weather-related, which was relevant as we booked higher sales as the quarter progressed. March was particularly strong. And so without any other sales from the Hydra A.E.R.O., it was refreshing to see our core products carry the load as we obviously not only have loyal customer base, but also making their way into more interventionalists and surgeons' hands. We obviously, have more work to do, especially on the spine surgeon side, which has been a bit tipping, but is expected to pick up in the back half of the new year. Sales representatives that specialize the spine side of the business recently joined Aurora. It is very timely as we have rereleased our APOLLO plate, which has helped us selling our DEXA branded products, including the DEXA-C for cervical and DEXA-L for the lumbar procedures. We have high hopes for DEXA-L, as the size occurs more frequently in the lumbar section of the spine due to heavier loads that are put into the proportion of the spine. In addition, the CDC estimates that almost half of the U.S. population over 50 years of age will have low bone mass. This equates to millions of patients that need an implant that matches their bone density when having spine surgery. While we are on the topic of DEXA, it is important to note that subsequent to the end of the first quarter, we announced the issuance of a fourth U.S. patent related to our proprietary DEXA technology platform. The recent issued patent titled Bone Density Scan Result-Matched Orthopedic Implants and Methods of Use further strengthens the Aurora Spine intellectual property portfolio surrounded patient-specific bone density matched implants selected for use. The patent technology describes methods of obtaining the patient's bone density information, including the DEXA T-score or bone density measurement, selecting an implant and having bone density levels matched to the patient's native bone at the implantation site and implanting the selected device. By giving surgeons an implant option designed around bone density, Aurora is advancing a more personalized and intelligent approach to spine surgery. Throughout the issuance of this patent, Aurora's competitive position will improve and support the continued development of the next-generation DEXA technology-based implant across the company's spinal implant portfolio. We believe the DEXA products will be a key growth catalyst in 2026, especially that our APOLLO plate is now in stock, and we have fulfilled orders to our current DEXA products. We have begun to ramp up marketing efforts on the platform and expect it to build momentum through the year. The SiLO platform, which is primarily dominated by the TFX, continues to be a major contributor to our revenues. While sales of SiLO in Q1 are in line with the same quarter a year ago, we are focused on introducing a couple of product extensions to the franchise that will be able to offer more variety of SI joint products for paid interventionalists. The first product that we expect to be ready to go to market over the summer is a product for SI joint and will be administrated by using a lateral bleak approach, which is a different approach than TFX uses. The lateral bleak approach is the #2 type of approach currently used in the SI joint pain. And the feedback we received from our sales team has been given us the popularity of the lateral bleak approach that demand for such of a product would be worthwhile to add to our existing SiLO franchise. We are excited about the release of this product as we are planning for it to be Aurora's first product with a disposable kit. We are in the midst of lining up doctors to use the product upon launch and believe this will act as a good catalyst back in half of 2026. That concludes my formal comments, and I will now turn the conversation over to Matt Goldstone, Aurora Spine Chief Commercialization Officer. Matt, please proceed.

Thank you, Trent. We continue to be in the midst of growing our sales team to improve our national coverage. We are excited about all of our new hires. They are rapidly getting up to speed and contributing to Aurora's success. While we are adding more salespeople, we had to backfill underperforming regions from Q4 of 2025 and Q1 of 2026. The first quarter of the year started a bit slower than usual due to the weather-related issues in the northern part of the country. In addition, we had to work through some pricing pressures in the market. Putting these temporary issues aside, the team is focused on developing the spinal surgeon market, specifically with DEXA-C, Aurora's proprietary plate APOLLO and the alpha launch of DEXA-L. To give an update on where we currently are, we currently have 14 sales people as of today, and we're excited about the additions to the team. We've added 5 new salespeople recently and are scheduled to meet our goal of increasing the sales force by 50% this year. We continue to forge forward with our new products and integrating them into the team. The clinical success of our SI joint portfolio and our lumbar fusion products continues to drive Aurora forward. We have a great opportunity ahead of us as many of our product platforms and products for this market are working into emerging markets that are rapidly growing. While we have more work to do, we are excited about our future and have the right products available to deliver the best outcomes for patients. That concludes my formal comments. Now I'll turn the conversation to Chad Clouse, Aurora Spine's CFO, for some comments on financials.

Thank you, Matt. Total revenues for the first quarter of 2026 were $4.44 million, an increase of 0.4% when compared to $4.42 million in the same quarter 1 year ago, primarily due to increased sales in ZIP lumbar implants and Aurora Biologics. Gross profit margin once again stronger and came in at 62.6% in the first quarter, a nice improvement of 460 basis points from 58% in the first quarter of 2025. Gross profit margin was primarily higher due to the company recording more direct sales of products as compared to sales of third-party products through distributors. Gross margin continues to be at a strong level and believe this level is sustainable as we sell more proprietary products and utilize our direct sales channels. Total operating expenses were $2.98 million in the first quarter of 2026, which is slightly up compared to $2.8 million in the first quarter of 2025, showing continued tight expense controls. EBITDAC, a non-GAAP figure, was approximately $107,000 for the first quarter of 2026 compared to a negative $20,000 in the same quarter a year ago. Improvements to EBITDAC levels for the first quarter were due to higher gross margin and tighter expense controls. Net loss was $203,000 for the first quarter of 2026 compared to a net loss of $350,000 for the first quarter a year ago. Basic and diluted net income per share was $0.0 per share for the first quarter of '26 and $0.0 per share for the first quarter of 2025. Moving to the balance sheet. We ended the quarter and year with nearly $800,000 in cash. Accounts receivables were significantly lower relative to prior quarters, ending the first quarter just under $3 million, down from $3.3 million at the end of the fourth quarter and $4.2 million at the end of the third quarter last year. Lower receivables have helped our cash flows and we were able to lower our payables in the last 2 quarters, putting the company on a better footing. We believe the capital structure is sufficient to meet the budgetary needs for the remainder of the year. That concludes my comments. I'll now turn it back to Trent.

Thanks, Chad. To summarize, the team at Aurora are highly focused and driving to build this company with the lineup of proprietary products we've developed in the past few years. We are well positioned to take advantage of the emergencies of the minimally invasive procedures for the spine health and for many new proprietary products. We are very pleased about our product offering and believe that they will have meaningful years to come. We are excited for what lies ahead for Aurora and continue to expand and tweak our internal sales team as we continue to expand our territory coverage in the U.S. We are in the midst of reworking the sales team and optimizing our efforts. We expect the second quarter revenues levels to be in line or slightly lower than we had reported a year ago. That said, we believe that we are on the right track to enhance the company's revenue growth rate through new products and offering and including 2 new product extensions that will be launched later this year. We are very excited about the company's future opportunities and the product lines that we have brought to the market. We will continue to build the sales team efforts and educate the marketplace of our products and the value they bring to patients. We are very excited about the future for Aurora Spine for 2026 and beyond. With that said, operator, we are ready for any questions.

Our first question comes from Tom Fedichin with Microcap Connection.

I wanted to ask about forward-looking guidance. I know you had mentioned that the next quarter will be slower as you take a step backwards and reorganize the sales team. What's it going to take to increase sales 15% to 20% year-over-year? I think that's what we've all invested in the story for. I know the facet is not being rolled out at the moment due to some changes. But what's it going to take to get those numbers up?

Well, we're going to have to find the right people who fit into the right areas as far as like regional sales directors in those markets. We do a good job of qualifying people that have an experience or that they have history in the particular market, like either conventional or in spine. But then it comes down to, can they execute on that plan in those areas. During the interview process, we were really diligent. We don't hire quickly. We interview very slow and we go through a process with people in our sales organization that they have to go through a series of interviews. But when you get down to it, when they get hired, they have to -- the run needs to hit the road there where people have to perform on what they estimated themselves. So what is it going to take? It's going to take some few more regions that are going to be added online, which Matt Goldstone has done. He's added recently 3 new individuals into the sales market in areas that were previously either vacated because of lack of performance or in areas that we actually didn't have anyone participating in the sales drives in those locations, such as regional coverage or new distribution opportunities. I'll let Matt touch on that to go over more on how we can get to the 20% plus growth.

Thank you, Trent. Yes, I agree with all of your points. And I really think it is an amount of people carrying the water together. In the past, as we have hired people, a lot of it has been to optimize the regions that we were currently focusing on. But as we have expanded across new territory, that opportunity will drive new revenue. So as we're able to put more people into these markets, that will ultimately be able to press the number up to the expected amount.

When I look at the company year-over-year and I look at being relatively flat, it begs a question as to the adoption of doctors. As you bring on more physicians who use your products, is the longevity there? Are the doctors continuing to use your product year after year? Is there an issue with stickiness? Or is it just that it's a slow process to ramp doctors up and they just don't convert so quickly?

I think there's a lot of shiny objects that come out that might distract physicians on a momentary basis. But I think the continued clinical success of the Aurora portfolio is sticky. We have phenomenal outcomes with our SI joint patients. We have phenomenal outcomes with our lumbar fusion patients. And I continually hear back from physicians how impressed they are with how well their patients are doing. So that into itself, I think, drives the continued success. So I think it really does come down to the manpower and the consistency of coverage.

So one of the things that we see through the interventional side of the market, the interventional doctors are still, they are still pioneering this space, right? This particular space of minimally invasive procedures being performed by interventionalists is still brand new. It's not like they've been at this for 20 years now. It's only been going on for a few years. So many of the interventional doctors will start out with a handful of cases and then they'll follow those cases to see how they perform. They're still dealing with the dynamics of that marketplace with the ortho and the neuro community where they're trying to balance that referral base that just playing nice mBox approach to medicine, a dynamic that is still being developed. And it's an exciting market because it's growing and expanding, but it's growing and expanding at a rate that is slower than, say, an ortho and a neuro how that it got expanded into spinal procedures, but expanding from the standpoint that these new doctors are now offering this procedure option to their patients without having to go have a big surgery at the hospital.

What are the growth drivers that are going to get you to 15% to 20%? I ask you because I think like many investors was looking at the facet thinking that was the growth driver for this year. Knowing that, that is not being marketed at the moment and maybe you can give us an update on when you think that will get marketed again. But what will be -- other than just having new salespeople, where do you see the growth coming from for the balance of the year?

I was just going to point out that our spinal portfolio is maturing. We've had DEXA-C out for a couple of years now, but the launch of DEXA-L at the end of last year, we are well into our alpha launch and we'll be going into a limited launch later this year. So our DEXA portfolio will be driving a lot of growth and getting Apollo back onto the market really allows us to have a procedural solution for an ACDF, which makes the sell and the opportunity in the OR a lot stronger. Otherwise, we were losing dollars and a lot of times, you didn't need 2 people in the room to do 1 case. And so now we're able to really offer a full procedure option.

So that's good. You're going to say that...

Yes. What I was going to say was the SiLO-X product, which is lateral oblique, gives us another shot on goal, which we did not have before. The market had changed from just a pure lateral approach to allograft, which was a posterior approach. But the coding and reimbursement was that headwind that we had talked about, you remember when we had to deal with that. And the oblique approach, which was just putting a couple of screws in lateral oblique approach was a procedure that became more and more familiar with some interventional doctors and even ortho doctors who didn't want to put in 3 lateral screws, just wanted to work through a smaller incision versus the old approach. And that was the 2 that were really were driving the SI joint market, which was a posterior approach like [Technical Difficulty] instead of us just finding the system, we said, well, we can get an approval on that. We'll just make our own lateral oblique system. That way, if there's an objective to using a posterior approach or they're just not familiar with going posterior, then we have another opportunity to present to them. So when that product gets released here in the second half of the year, that's going to be a growth driver for the company because those are really the 2 fastest-growing segments in the SI joint fusion market. The other part of our development of SiLO is to continue to expand the portfolio, which is what we've done, which we've been talking about for a couple of years now that we would always stay ahead of it, and that's what we've done.

Can you give us an update on the Facet, where we stand with that?

Yes, the good news is I have no bad news. That's really where we are with it. It's with the FDA. There may not even have to be a change. It's just a matter of a conversation. So I'm very optimistic about what the conversation that we had. We have 2 very high-end FDA consultants that work for us. And the conversation has been pleasant, hasn't been difficult, and we're making progress. But I can't -- I don't have a crystal ball in front of me, but the good news is I have no bad news. And we are in the discussion with the FDA and it might just be something as simple as getting some additional testing, biomechanical testing, and we're hopeful that that could be the result that we need then to continue to bring the product back into the market. The product is for the record, still FDA approved. It has not been pulled from the market. It is FDA approved. But we are just working with the FDA on some questions that they have that we are answering and addressing.

The TFX, you had some sort of -- there's a legal issue with the, I guess, the company or group that you licensed it from that you were working through that you didn't think was going to be an issue. How is that going? Is that kind of come to a resolution or is it -- look any closer to a resolution?

It's closer to a resolution. We make progress on it. I don't want to say weekly, but we make progress on it on monthly. And ultimately, I think it will get resolved.

Yes, I think that's pretty much it, other than really just asking, as we look forward, I know you say we're taking a step back. If there's anything that we should be looking for or any metric that we should be asking you, what would that be? Like what should an investor be focused on as we go into Q2, Q3, even Q4?

Well, we had to make some changes with some of our salespeople. Some people made their own changes and help make the decision easier for us. We've just added some new sales people. Some of them had spine experience. We touched on that during the reporting that we wanted to add more salespeople that could be focused and have a spine experience background. One of the individuals that we added actually came from a very successful lateral SI joint management. So he had management experience in SI joint. He's now part of the team and he's now in an area that we didn't have any coverage in actually since we started the company. So it's in the Northeast part of the country, which we're really pleased with -- sorry, Northwest part of the country, and we're very pleased with that. So that's a good addition, adding these people that are going to be focused on either cultivating a new area where there's opportunity because there's already some existing business, but now they can really expand on it because there's customers that just haven't been called on because we've been flying people in to cover those cases from across the country. Now having a person in that area, a local, if you will, I think will make a big difference for us in those sales cycles. Matt will touch on that further.

Yes, I would just add that all of the 5 sales people that have been added to the team over the last quarter are stratified over the last 3 months, just say. And it takes about that 3-month window to start seeing the contribution of they're getting their feet underneath them, getting their facilities organized, getting engaged with the physicians that they want to target. So we are starting to see contributions from them already, and I expect to see that ramp up substantially over the next 3 to 4 months.

With the new sales directors on board and trained up and with the prospects of growth ahead, the one thing that's missing, I think, would be going to different events, whether it'd be Planet MicroCap or whether it'd be Smallcap Discoveries events? Or do you see yourself going on the road and selling the story Trent? You did a great job at Planet MicroCap in Vegas. I don't know of anybody that wasn't impressed. I think there's one thing that I could suggest would be or would suggest is that maybe to get on the road and sell the story. And I think that you would probably attract a lot more people to the stock.

I'm completely on board with that. I did close out the year -- I'm sorry, not to close out the year. We did have 2 things that we've done recently. We participated at the ROTH Conference up here in Southern California, just north of us. And then we also most recently joined the -- met the new President of the Toronto Exchange, the TSX and then the TMX team, which is the Toronto Marketing Exchange team. And we are making changes to the way that we put out our press releases. We're working directly with the TMX on that. We think that that's going to help -- give us some more areas that we just weren't penetrating like we just weren't getting out there, the messaging wasn't carrying. And then the microcap conference today, I have a handful of one-on-one case presentations, and I want to be able to get out to get the story to resonate -- there is a resonating story here, and there is a growth strategy and a growth story that is underway.

Perfect. Well, guys, thank you for your time. That's all pretty much the questions I've got. But I appreciate you taking the opportunity and to have this call and wish you the very best as we go forward into Q2 and beyond.

Thank you, Tom. We really appreciate you staying with us and carrying the story yourself. So thank you for being a big believer in Aurora.

This concludes our question-and-answer session. I would like to turn the conference back over to Trent Northcutt, for any closing remarks.

I want to thank everyone for joining us for today's call. We are very pleased with the way that we are positioning ourselves in Aurora for 2026. If you have any questions, please schedule any more meetings with Adam Lowensteiner at Lytham Partners, and we'll be happy to address your calls. Thank you, and I'll conclude the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.