12:13:10 EDT Thu 28 Mar 2024
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Aurora Spine Corp
Symbol ASG
Shares Issued 41,176,317
Close 2019-08-21 C$ 0.43
Market Cap C$ 17,705,816
Recent Sedar Documents

Aurora Spine loses $44,105 in Q2 2019

2019-08-22 10:17 ET - Shareholders Letter

Mr. Trent Northcutt reports

AURORA SPINE CORPORATION REPORTS RECORD Q2 REVENUE; FILES CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019

Aurora Spine Corp. has released its financial results for the three and six months ended June 30, 2019.

Dear shareholders,

The second quarter of 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 toward bringing two new projects to market in the coming fiscal year.

Highlights:

  • 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 per cent, compared with the same period in 2018. Sales of cervical plates, lumbar cages and lumbar screws led the way, growing more than 90 per cent, 180 per cent and 90 per cent, respectively, compared with Q2 2018.
  • Gross profit rises -- Gross profit was approximately $1.29-million, up over $164,000 over the comparable quarter last year.
  • Improved cash flow in Q2 2019 -- Cash flow, as measured by EBITDAC (earnings before interest, tax, depreciation, amortization and stock-based compensation), was $259,000 for the quarter, a significant improvement on our Q1 EBITDAC of $86,000. 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 (generally accepted account principles), non-IFRS (international financial reporting standards) measure.

Comparative -- three months ended June 30, 2019, and June 30, 2018

During the three months ended June 30, 2019, we generated revenues in the amount of $3,260,247, compared with $2,002,101 during the same period the previous year, an increase of approximately $1.26-million, or 62.8 per cent. Cost of sales was $1,971,382 and gross profit was $1,288,865, compared with $877,746 and $1,124,355 in the comparable period. While our actual gross profit improved, our gross margin was 40 per cent of revenues, compared with 56 per cent 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). 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 per cent.

During the three months ended June 30, 2019, EBITDAC was $259,250, compared with $298,579 during the same period the previous year. This represents the sixth consecutive quarter of positive EBITDAC for Aurora. This is down by $39,000 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 with $1,083,310 (adjusted by a gain on sale of property and equipment of $9,351) during the same period in the previous year. Operating expenses increased by $249,700, or 23 per cent, compared with 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 June 30, 2018

During the six months ended June 30, 2019, we generated revenues in the amount of $5,989,468, compared with $3,505,398 during the same period in the previous year, an increase of $2.48-million, or 70.9 per cent. The primary drivers of this increase were:

  1. An approximately $665,900 increase in sales of cervical screws, plates and cages, and a $2-million increase in sales of lumbar screws and cages;
  2. An overall net decrease of $172,000 in sales of ZIP and various other products.

Sales of Aurora products during the six months ended June 30, 2019, grew by 31.5 per cent 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 amounted to $3,535,886 and gross profit was $2,453,582, compared with $1,504,199 and $2,001,199 in the comparable period. While our actual gross profit improved, our gross margin was 41 per cent of revenues, compared with 57 per cent 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 with $371,556 during the same period in 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 and Zipflex. These two 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 with $2,119,837 (adjusted by a gain on sale of property and equipment of $10,922) during the same period in the previous year. Excluding the adjustments, operating expenses were $2,702,506 (2018 -- $2,130,759), 26.8 per cent higher, compared with the same period the previous year.

Selected quarterly information

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

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's discussion and analysis, can be found on SEDAR.

Trent J. Northcutt, president and chief executive officer

About Aurora Spine Corp.

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.

We seek Safe Harbor.

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