Nasdaq

Aurora Spine Corporation Reports Record Q2 Revenue; Files Condensed Interim Consolidated Financial Statements for the Three and Six Months Ended June 30, 2019

22-08-2019

NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES

CARLSBAD, Calif., Aug. 22, 2019 (GLOBE NEWSWIRE) -- Aurora Spine Corporation (“Aurora Spine” or the “Company”) (TSXV: ASG) announces financial results for the three and six months ended June 30, 2019.

To our Shareholders:
Q2 2019 was a strong quarter for the Company based on several financial metrics and saw the Company begin to undertake significant research and development efforts towards bringing two new projects to market in the coming fiscal year.

  • Increased Revenue – During the quarter, we generated $3.26 million in revenue, the highest quarterly revenue in the Company’s history. The changes represent an increase of $1.26 million or 62.8% as compared to the same period in 2018. Sales of Cervical Plates, Lumbar Cages and Lumbar Screws lead the way growing more than 90%, 180% and 90% respectively as compared to Q2 2018.
  • Gross Profit Rises - Gross profit was approximately $1.29 million up over $164k over the comparable quarter last year.
  • Improved Cash Flow in Q2 2019 - Cash Flow as measured by EBITDAC was $259k for the quarter, a significant improvement on our Q1 EBITDAC of $86k. The quarter also saw larger amounts spent on product development for new products and sales expenditures to help meet both our long and short-term revenue goals. EBITDAC is a non-GAAP, non-IFRS measure defined as Earnings before interest, taxes, depreciation, amortization and stock-based compensation, adjusted by the gain (loss) on sale of property and equipment.             

Comparative - Three Months Ended June 30, 2019 and 2018
During the three months ended June 30, 2019 we generated revenues in the amount of $3,260,247 compared to $2,002,101 during the same period the previous year, an increase of approximately $1.26 million or 62.8%.  Cost of sales was $1,971,382 and gross profit was $1,288,865 as compared to $877,746 and $1,124,355 in the comparable period. While our actual gross profit improved, our gross margin was 40% of revenues compared to 56% in the comparable period. This decrease reflects a growing trend wherein our third-party party product sales are growing at a faster rate than our proprietary product sales (we earn significantly less margin on third-party products). Also, Q2 saw increased external commissions paid to some of our key distributors. We continue to look at ways to mitigate these margin differences including discussions with some of our key third-party suppliers to improve our costs as volume grows and expect to see progress on these discussions by year end. We are working on increasing all our major product lines’ gross margins to exceed 50%.

During the three months ended June 30, 2019, EBITDAC was $259,250, compared to $298,579 during the same period the previous year. This represents the sixth consecutive quarter of positive EBITDAC for Aurora. This is down by $39k from a very strong comparable quarter in Q2 2018. Our EBITDAC performance reflects a changing product sales mix, increased selling expense to drive top line growth and increased R&D expenditures to support development of our new SI Fusion product (EaSIfix) and Zipflex. These two product lines are expected to further boost sales with a target date in 2020. 

Operating expenses during the current quarter were $1,332,970 compared to $1,083,310 (adjusted by a gain on sale of property and equipment of $9,351) during the same period the previous year. Operating expenses increased by $249.7k or 23% as compared to the same period the previous year reflecting the Company’s increased sales activity, product engineering and research and development efforts on several new products during the quarter. These expenses reflected the Company’s drive for increased revenue growth and future products.

Comparative - Six Months Ended June 30, 2019 and 2018
During the six months ended June 30, 2019 we generated revenues in the amount of $5,989,468 compared to $3,505,398 during the same period the previous year, an increase of $2.48 million, or 70.9%.  The primary drivers of this increase were:

(i) An approximately $665.9k increase in sales of cervical screws, plates and cages and a $2 million increase in sales of lumbar screws and cages; and
(ii) an overall net decrease of $172k in sales of ZIP and various other products. 

Sales of Aurora products during the six months ended June 30, 2019 grew by 31.5% over the comparable period (including softer ZIP sales) whereas sales of third-party products, primarily screws, plates and stand-alone cages more than doubled.

During the six months ended June 30, 2019 cost of sales was $3,535,886 and gross profit was $2,453,582 as compared to $1,504,199 and $2,001,199 in the comparable period. While our actual gross profit improved, our gross margin was 41% of revenues compared to 57% in the comparable period. This decrease reflects a growing trend wherein our third-party product sales are growing at a faster rate than our proprietary product sales (we earn significantly less margin on third party products).

During the six months ended June 30, 2019, EBITDAC was $345,683, compared to $371,556 during the same period the previous year. The decline resulted in our Q1 performance and, as noted above, increased R&D expenditures to support development of our new SI Fusion product (EaSIfix) and Zipflex. These 2 product lines are expected to further boost growth of Aurora in 2020.

Operating expenses (adjusted by a loss on sale of property and equipment of $782) during the current period were $2,703,288 compared to $2,119,837 (adjusted by a gain on sale of property and equipment of $10,922) during the same period the previous year.  Excluding the adjustments, operating expenses were $2,702,506 (2018 - $2,130,759), 26.8% higher compared to the same period the previous year. 

SELECTED BALANCE SHEET INFORMATION

The following table summarizes selected key financial data.

As at June 30, 2019
$
December 31, 2018
$
December 31, 2017
$
Cash 389,558 856,504 12,665
Trade receivables 2,375,086 1,584,269 811,491
Prepaid expenses and deposits 240,514 219,301 471,859
Inventory 2,580,830 2,562,957 2,462,509
Current assets 5,585,988 5,223,031 3,758,524
Intangible assets 846,222 853,529 264,247
Property and equipment 958,672 766,602 1,265,720
Total assets 7,390,882 6,843,162 5,288,491
Current liabilities 2,263,042 1,868,960 1,735,108
Long-term liabilities 2,408,312 2,016,000 1,902,000
Common share equity 20,661,153 20,661,153 19,706,040

SELECTED QUARTERLY INFORMATION

Operating results for each quarter for the last two fiscal years are presented in the table below.

Quarters ended June 30,
2019

$
March 31,
2019
$
December
31, 2018
$
September
30, 2018
$
June 30,
2018

$
March 31,
2018
$
December
31, 2017
$
September
30, 2017
$
Revenue 3,260,247   2,729,221   2,500,976   2,675,947   2,002,101   1,503,297   1,349,975   1,676,738  
Cost of goods sold (1,971,382)   (1,564,504)   (1,266,038)   (1,319,018)   (877,746)   (626,453)   (1,017,320)   (970,801)  
Gross profit 1,288,865   1,164,717   1,234,938   1,356,929   1,124,355   876,844   332,655   705,937  
Operating expenses 1,332,970   1,370,318*   1,324,231*   1,217,196*   1,083,310*   1,036,527*   1,230,740*   1,034,319  
EBITDAC** 259,250   86,433   157,823   396,809   298,579   72,977   (649,335)   (100,022)  
Net income (loss) (44,105)   (205,601)   (89,293)   139,733   41,045   (159,683)   (898,085)   (328,382)  
Basic and diluted income (loss) per share (0.00)   (0.00)   (0.00)   0.00   0.00   (0.00)   (0.03)   (0.01)  

*    Adjusted by gains (losses) on sale of property and equipment.
** EBITDAC - a non GAAP, non IFRS measure defined as Earnings before Interest, Tax, Depreciation, Amortization and Stock based Compensation. Additionally, this amount is adjusted by gains (losses) on sale of property and equipment.

I am exceptionally proud of our accomplishments in the second quarter. We achieved another quarter of successive revenue growth, as we reached record-breaking revenue goals. We continue to execute our strategy by adding professional spine-focused sales distribution, while bringing modern technologies to our portfolio in order to accelerate new surgeon adoption.

While we still have a great deal of work to do, we are extremely excited to unleash the full potential of Aurora Spine and our commitment to - Simplifying the Complex.

The statements together with the Management Discussion and Analysis can be found on SEDAR at www.sedar.com.

Trent J. Northcutt
President and Chief Executive Officer

About Aurora Spine
Aurora Spine is an early stage company focused on bringing new solutions to the spinal implant market through a series of screwless, innovative, minimally invasive, regenerative spinal implant technologies. Aurora Spine continues to position itself at the forefront of spinal surgery procedures, focusing on minimally invasive spine surgery technologies. Aurora Spine is changing spine surgery by focusing on disruptive technologies following the Company's commitment to - Simplifying the Complex.

Forward-Looking Statements
This news release contains forward-looking information that involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Aurora Spine, including, without limitation, those listed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Information" in Aurora Spine's final prospectus (collectively, "forward-looking information"). Forward-looking information in this news release includes information concerning the proposed use and success of the company’s products in surgical procedures. Aurora Spine cautions investors of Aurora Spine's securities about important factors that could cause Aurora Spine's actual results to differ materially from those projected in any forward-looking statements included in this news release. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ unilaterally from those expressed in such forward-looking statements. No assurance can be given that the expectations set out herein will prove to be correct and, accordingly, prospective investors should not place undue reliance on these forward looking statements. These statements speak only as of the date of this press release and Aurora Spine does not assume any obligation to update or revise them to reflect new events or circumstances

For more information, please contact:

Aurora Spine Corporation   
Trent Northcutt  Sarina Mason
President and Chief Executive Officer Chief Financial Officer
(760) 424-2004  (760) 424-2004
www.aurora-spine.com