Aurora Spine Corporation Reports Record Q1 Revenue, Files Condensed Interim Consolidated Financial Statements for the Three and Nine Months Ended September 30, 2019

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

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

To our Shareholders:

Q3 2019 was a watershed quarter for the Company and served to sharpen our strategic direction as we prepare for 2020 and the longer term. In the last 2 quarters, we have seen a rapid acceleration of sales in what we call third-party products; those products we in-license from other vendors in order to meet the needs of surgeons, both new surgeons and those we currently we work with and their patients. Third-party products, when used in conjunction with Aurora products may serve to enhance our sales but they may also act to displace certain of our own Aurora products. Certain of our surgeons and hospital groups have indicated a strong preference for having all of our products be of the Aurora brand. In addition, as can be seen in this quarter’s financial information, sales of these third-party products are significantly less profitable to the Company.

We are pleased to announce that our efforts to address these concerns, begun in Q2 2019, are expected to begin making a significant difference starting as early as Q1 2020. We have been exploring everything from working with our third-party vendors to allow branding changes and price adjustments, to acquiring FDA cleared products that meet our requirements, to combining with other companies with products that would complement our own Aurora products. We are well down this road and expect to begin announcing some of these changes in early 2020. We believe the positive impact on our cashflow next year will be significant.

In addition to the above, Q4 2019 sees us working hard to finalize and bring to market 3 new products: two new SI Joint fusion products in development, one of which is expected to be in the market in Q1 2020 and our ZIPFlex expected at the end of next year. Some of the costs from all of these initiatives can be seen in our Q3 2019 financials relating to marketing, travel and G&A.

Comparative - Three Months Ended September 30, 2019 and 2018

During the three months ended September 30, 2019 we generated revenues in the amount of $2,530,602 compared to $2,675,947 during the same period the previous year, a decrease of just over 5%.  Sales of cervical screws and plates and biologics increased, offset by a decrease in sales of cervical and lumbar cages and ZIP products.

More importantly, sales of Aurora products during the three months ended September 30, 2019 decreased by 32.3% over the comparable period, whereas sales of third-party products, primarily screws, plates and stand-alone cages grew by 31.9%.

During the three months ended September 30, 2019 cost of sales was $1,518,986 and gross profit was $1,011,616 as compared to $1,319,018 and $1,356,929 in the comparable period. Our gross profit decreased by $345k, or 25.4%. Our gross margin was 40% of revenues compared to 50% in the comparable period. This decrease reflects a growing trend wherein our third-party party product sales are growing at a faster rate than or cutting into our proprietary product sales (we earn significantly less margin on third-party products). Also, external commissions paid to some of our key distributors increased during the current quarter. We are looking at ways to mitigate these trends including acquisitions and 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.

During the three months ended September 30, 2019, EBITDAC was a negative $116,189, compared to $396,809 during the same period the previous year. The previous six consecutive quarters showed positive EBITDAC for Aurora. Drivers of this decline are a changing product sales mix (with expectations of significant positive change over the next few quarters), increased marketing and travel expenditures, an increased reserve for bad debts, and increased R&D expenditures to support development of our new SI Fusion products (SiLO and EaSIfx) and ZIPFlex. These two product lines are expected to further boost sales in early 2020. 

Operating expenses during the current quarter were $1,429,015 compared to 1,217,196 during the same period the previous year. Operating expenses increased by $211.8k or 17% as compared to the same period the previous year reflecting the Company’s increased sales and marketing activity, increased reserves for bad debts and increased 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 - Nine months Ended September 30, 2019 and 2018

During the nine months ended September 30, 2019 we generated revenues in the amount of $8,520,070 compared to $6,181,345 during the same period the previous year, an increase of over 37%.  Sales of biologics and cervical screws, plates and cages and lumbar screws and cages increased, offset by a decrease in sales of ZIP products. 

Sales of Aurora products during the nine months ended September 30, 2019 grew by less than 1% over the comparable period (including softer ZIP sales) whereas sales of third-party products, primarily screws, plates and stand-alone cages almost doubled.

During the nine months ended September 30, 2019 cost of sales was $5,054,872 and gross profit was $3,465,198 as compared to $2,823,217 and $3,358,128 in the comparable period. While our actual gross profit improved, our gross margin was 41% of revenues compared to 54% in the comparable period. This decrease reflects a growing trend wherein our third-party product sales are growing at a faster rate than or cutting into our proprietary product sales (we earn significantly less margin on third-party products). Also, external commissions paid to some of our key distributors increased during the current period. We are looking at ways to mitigate these trends, including acquisitions and 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.

During the nine months ended September 30, 2019, EBITDAC was $229,494, compared to $768,365 during the same period the previous year. Drivers of this decline are changing product mix (with expectations of significant positive change over the next few quarters, as noted above), increased marketing and reserves for bad debt and increased R&D expenditures to support development of our new SI Fusion product (EaSIfx) and ZIPFlex. These two product lines are expected to further boost sales in early 2020.

Operating expenses during the current period were $4,132,303 compared to $3,337,033 during the same period the previous year. Excluding the adjustments, operating expenses were $4,131,521 (2018 - $3,345,389), 23.5% higher compared to the same period the previous year. 

SELECTED BALANCE SHEET INFORMATION

The following table summarizes selected key financial data.

SELECTED QUARTERLY INFORMATION

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

*    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.

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

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

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