Aurora Spine Corporation

Good day and welcome to the Aurora Spine second quarter fiscal year 2026 financial results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Adam Lowensteiner with Listen Partners. Please go ahead.

Thank you, Betsy. Welcome, everyone, and thank you for joining us today to conduct an update with investors and review the financial results for Aurora Spine for the second quarter fiscal year 2026 that ended June 30, 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. Before we begin, I would like to remind everyone that the 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 for looking statements, but their absence does not mean a statement is not for 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 full discussion of these risks, uncertainties and factors, you're encouraged to read Aurora Spine's documents on file with CDAR, 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 EBITDA, adjusted EBITDA, 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, 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 the SEC Regulation G can be found in the company's earnings release. With that, now I'd like to turn over the call to Mr. Trent Northcutt, President and Chief Executive Officer of Aurora Spine. Trent, please proceed.

Thank you.

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 Clouse, our chief financial officer, who will then briefly review the company's financials. Afterwards, I will make some brief concluding remarks and then open the call to answer any questions you may have. As expressed in today's press release, the second quarter results were disappointing, which reflects the transition of retooling our internal sales team, which we referred during the memory remarks on the first quarter's conference call. Adding to this was also now settling into dispute the underlying patent holder of the siloed TFX as well as increasing competition in the SI joint market that we experienced in the quarter. This was reflected in the lower sales in the company's paying market channel where much of the internal sales team was currently focused. Despite these challenges associated with the reshaping of our internal sales team, We had a few positive highlights, including strong sales on the spine side of the business. We saw strong demand for our DEXA brand products, particularly DEXA C, which experienced a 66% increase in sales during the second quarter. In addition, our Apollo plates are back in production and now shipped alongside our DEXA products. This allows us to provide customers with more complete product offering while improving our overall profit margin. We believe this momentum can continue as surgeons increasingly recognize the value of having implants specifically designed for patients with bone deficiencies. This was a great quarter for Aurora's DEXA franchise, and we're looking forward to building further momentum into the remainder of the year. Another highlight is that we recently announced the key strategic commercialization lines with CornerLock, which has already begun to open up new doors for the SI joint products. For those not familiar with Corner Lock is a privately based company out of Tulsa, Oklahoma that is innovative SI joint fusion technology is now our sales team can immediately introduce to its existing and prospective accounts. Specifically speaking, Corner Lock has an SI joint product that is installed using a lateral oblique approach, which is currently the number two approach in the SI joint market. and procedures that are performed with this device. Our product did not cover this approach. Now that we have met this product with the prospective doctors, we have complete offering of products to sell them, depending upon their desire of the surgical approach. Simultaneously, Aurora's innovative technologies are now available to the CornerLock sales team. This reciprocal relationship allows both companies to offer a broader suite of SI joint products while giving surgeons greater flexibility to select the technology that best fits their preferred surgical approach. I'm very excited about this partnership. As many industry leaders, CornerLock and Aurora Spine products are supported by strong clinical data and thousands of successful installations, demonstrating their safety and effectiveness. I couldn't be more pleased about this partnership and I believe it can create significant long-term value for both companies while providing meaningful benefits to surgeons and their patients. While we remain in the midst of the sales team transition, we are increasingly excited about Aurora Spine's future. We have a strong and differentiated portfolio of technologies across both the pain and spine markets. This diversified product offering is an important part of the business that we are building at Aurora. We have made significant updates to our sales organization and believe now we have the right team and structure in place to support future growth. We are confident that we are on the right path and look forward to updating our investors on these initiatives. Our new products and our new opportunities are ahead. That concludes my formal comments. I will now turn the conversation over to Matt Goldstone, Aurora Spine's Chief Commercialization Officer. Matt, please proceed.

Thank you, Trent. We continue to retool and strengthen our internal sales team to optimize our potential and improve national coverage. We're actively hiring in markets across the country as we build out the team, and we're being intentional about finding people who are the right fit for long-term success. Getting the right people in place makes all the difference. That said, we are really enthused about the strategic alliance with CornerLock. The two teams have done a fantastic job and we have seen synergies across the country. The team is focused on deepening our inroads within the spinal surgeon market. As Trent mentioned, those efforts have been successful and we've seen record-setting months in both DEXA-C and DEXA-L. Our relaunch of Apollo has also seen record sales during the second quarter. We're also adding a four-level Apollo plate to provide physicians with an option for longer constructs. Helping drive these increases are numerous facility approvals. We've also started working with many academic centers across the country. As evidenced in the second quarter, we've been able to advance our DEXA side of the business We have a great advisory team for these products and are actively working to expand the number of sets. We're pleased with these improvements and are looking forward to building on this momentum. To give an update on where we stand, we currently have 15 salespeople as of today, and we're excited by the progress the Q1 hires are making in their respective markets. We continue to move forward with our new products, integrate them into Our team and get them in front of both current and prospective customers. We have a tremendous opportunity ahead of us as many of our product platforms serve markets that are still emerging and have very bright futures for the years to come. We do have more work to do, but we're excited about our future and we're confident we're We have to deliver the best outcome for patients. This concludes my formal comments. I'll now turn the conversation over to Chad Clouse, Aurora Spine CFO, for some comments on our financials. Chad, please proceed.

Thank you, Matt. The company's financial performance in the second quarter was challenging but continues to be manageable for the near future. Little revenues for the second quarter of 2026 were 3.66 million, a decrease of 18.7% when compared to 4.5 million in the same quarter one year ago. Revenues for the second quarter were lower due to decreased activity in the pain market as the company retools its sales force. Pain sales declines were offset by increased sales of cervical implants and biologics. Gross profit margin was a little lower but was considerably strong coming in at 60.1% in the second quarter when compared to the second quarter of last year which was 62.2%. Gross profit margin was lower due to more sales to the spine market and pain market sales via distributors which both carry a slightly lower gross margin profile. That said, gross margin continues to be at a strong level and believe this level is sustainable as we sell more proprietary products and we utilize our direct sales channel. Total operating expenses were approximately 3.03 million in the second quarter of 2026, which is basically flat compared to 2.97 million in the second quarter of 2025, showing continued tight expense control. EBIDAC, a non-GAAP figure, non-IFRS measure, defined as earnings before interest, tax, appreciation, amortization, stock-based compensation with a was approximately negative $501,000 for the second quarter of 2026 compared to $142,000 from the second quarter a year ago. The reduction in EBITDA levels for the second quarter is due primarily to lower sales levels. Net loss was approximately $835,000 for the second quarter of 2026 compared to the net loss of $199,000 the second quarter a year ago. basically diluted net income per share with a negative 0.01 cents or 0.01 dollars per share in the second quarter of 2026 and 0.0 per share for the second quarter of 2025. Moving into the balance sheet, we ended the quarter and year with approximately $400,000 in cash. Accounts receivables continue to decrease relative to prior quarters ending the second quarter at $2.65 million down from approximately $3 million at the end of the first quarter and down from $3.3 million at the end of fourth quarter last year. The lower receivables have helped our cash flow and we were able to lower our payables in the past four quarters, putting the company on a better footing. We believe the capital structure is sufficient to meet our budget needs for the remainder of the year. That concludes my comments. I'll now turn to conversation Dr. Trent.

Thanks, Chad. To summarize, while the second quarter results did not meet our targets, they are not indicative of what we are building here. Our team remains focused and driven to building this company with the lineup of proprietary products we've developed in the past few years. We're well positioned to take advantage of this emerging of minimally invasive procedures for the spine health and with many of our new proprietary products. As we rework the sales team and optimize our efforts, we expect that second half revenue levels will be improved from the first half of the year. We believe we have excellent products and that we are on the right track to grow our revenue base. We're excited about the company's future opportunities and product lines that we have brought to the market along with the new alliance that we've signed with CornerLock just a few weeks ago. We will continue to build the sales team efforts and educate the marketplace with our products and value that they bring to patients across the country. We are very excited about the future of Aurora Spine. With that said, operator, we are ready for any questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Hi Betsy, it's Adam Lowensteiner from Lithum Partners. I'll jump in here with a few questions.

What were the sales to the spine surgeons in the quarter and how much of an increase was there from the prior year?

Thank you, Adam. Yeah, we had a nice increase from the prior year. Spine sales were 26% in the same quarter. They jumped from 26% to 41%. We, as Matt mentioned in his comments, we've now entered into more academic centers across the country so we can not only get the product utilized in surgery, but we can teach the future of spine surgery to these up-and-coming residents and fellows that are part of these great institutions for medical training.

You mentioned in your remarks about the retooling of the sales team. Where are we now in that process?

So I'm working closely with Matt Goldstone on selecting areas that are still open. We still have lots of areas in the country that are open. Some of our sales performance in regions that we've added were at the end of Q1. It was not the beginning of Q1. So really our sales team that we have currently is really in on to their first 90 days of the territory. So there's still hospital approvals needed. There are still sales to be had there that have not hit yet, but we're expanding. So I'll let Matt comment further, but he's also addressing the areas that are still open in the country.

Thank you, Trent. As Trent mentioned, we are actively hiring across the country. We're also working on sales management. So we have reorganized the leadership on the team, and that's where we're focusing our efforts to drive things forward.

I know it's early in the relationship, but has there been any initial traction that you can talk to with the new alliance with Corner Lock?

The trainings have happened between both of our companies. Those trainings have gone well between our sales force and Corner Lock's sales force. Surgeries have been performed on both sides, so we're proud of that. The traction will happen here soon. We're in those beginning steps, the beginning process of that. But as I mentioned, both sides have been trained. both sides seem to be very excited. Both sales management teams have met to talk about the strategy, to talk about why this made so much sense for Aurora and for Corneloc. And just a little side note, the CEO of Corneloc is somebody that I've known for over 20 years. So we have a very strong strategic relationship and are both excited about our futures working together.

The sales in Spine...

Go ahead, Matt. Sorry, the only thing I was going to add is that on top of all the collaboration we've had, we now are scheduling labs with physicians on both sides of the training process.

So there'll be many new customers that are going to be educated on the. Adam, did we lose you? I'm here, Matt. I think we lost Matt. Matt?

Matt's here. Go ahead. He answered his question, but I think he got kind of cut off.

Okay, I'll proceed to the next question. The sales in spine that increased, was it DEXA-C or DEXA-L or both? And any update on the launch of DEXA-L?

Yeah, so it was both. Both the DEXA-C saw, DEXA-C and DEXA-L saw unit increases. We were able to get approval at the facility that we were working towards getting on. And we're getting some really great x-ray images in the conversation. at some of the congresses across the country, the academic centers like NASS or ISAS or these other really great congresses that are around the country. We've been able to have roundtable discussions at those conferences to discuss the benefits of using a implant that is closely matched to the patient's bone density. So we saw an increase in both and we're really thrilled on that. And that's really the update that I have to the DEXA-L that we're getting more of the tooling in because it's a more comprehensive instrument set to be able to make the approach to an anterior approach of the DEXA-L. And those tools continue to come in and the sets begin to be populated. And we're also budgeting to build more infrastructure and more sets to support the DEXA-L sale.

It's finding its path now.

So I know Matt mentioned the company's up to 15 salespeople. How's the market for new salespeople? Is it still challenging finding new salespeople?

Yeah. Finding new salespeople is all about finding the right people with experience and kind of the right place in their career. And so we've been able to do that in many markets, but it's all about finding the right timing. And we are currently out there interviewing and that continues to be successful.

And are there any territories that you aren't covering but looking to cover in the near term? Which are those?

Well, there's so much opportunity out there. So I do see the whole country still as a blue ocean. So even markets that we're in, we need to be hiring additional sales support because we've had success in those markets. So really across the whole country, we are actively hiring.

Thank you for those answers as all the questions I have. Trent, pass it off to you to conclude.

Well, thank you everyone for joining us. We appreciate your time and interest in Aurora Spine and we continue to be excited about what's ahead. We appreciate your interest and support in Aurora Spine and we're looking forward to updating everyone in a few months on our progress. If you'd like to chat with Matt, Chad or myself, please reach out to Adam Lowensteiner from Lippin Partners and we'd be happy to schedule a meeting. Thanks again, everyone. Have a great rest of your day.

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