LIBERTY ALL STAR GROWTH FUND INC. Q1 FY2026 earnings call

Intellectual Property & Product Development

• A fourth U.S. patent for the proprietary DEXA technology platform was issued after quarter-end, expanding the company's IP portfolio for patient-specific bone density matched implants and strengthening competitive positioning
• The Silo SI joint franchise is adding a new product for the lateral oblique approach (the second most common approach for SI joint pain), scheduled for a summer 2026 launch; this will be Aurora Spine's first product with a disposable kit
• DEXA-L for lumbar procedures, which addresses a large patient population with low bone mass, is in alpha launch and expected to be a key 2026 growth catalyst
• The facet product remains fully FDA approved; the company is addressing FDA questions and expects a resolution to continue marketing

Sales Team Expansion

• The company is targeting a 50% increase in sales force size in 2026, with 5 new salespeople added recently, bringing the total to 14 as of the call
• New hires are focused on backfilling underperforming regions and expanding coverage into previously untargeted U.S. territories, with a priority on hiring experienced spine specialists
• Sluggish Q1 start was attributed to weather-related disruptions in northern U.S. markets, with sales picking up strongly in March

Financial Performance

• Gross profit margin improved to 62.6% YoY, a 460 basis point increase, due to higher direct sales volume
• Total operating expenses increased slightly YoY to $2.98 million, reflecting continued tight expense controls
• Non-GAAP EBITDA was $107,000 in Q1 FY2026, up from a negative $20,000 in Q1 FY2025
• Net loss narrowed to $203,000 from $350,000 YoY; the company ended the quarter with ~$800,000 in cash, and management confirms capital structure is sufficient for 2026 budget needs

Total company revenue for Q1 FY2026 was $4.44 million, a 0.4% increase from $4.42 million in Q1 FY2025. Increased sales were driven by the Zip Lumbar Implants segment and Aurora Biologics. The Silo platform (led by the TFX SI joint product) was in line with prior year Q1 sales and remains a major revenue contributor for the company. The DEXA bone-density matched implant portfolio (including DEXA-C for cervical procedures and the newly launched DEXA-L for lumbar procedures) is an emerging growth segment, supported by the re-released Apollo plate. Gross margin across all segments improved 460 basis points year-over-year to 62.6%, driven by a higher share of direct sales rather than third-party distributor sales.

• Management expects Q2 FY2026 revenues to be in line with or slightly lower than the year-ago quarter, as the company continues reorganizing and expanding its sales team
• The company maintains a long-term target of 15% to 20% year-over-year sales growth, expected to be achieved by the end of 2026 as new products launch and the expanded sales team ramps up
• DEXA product momentum is expected to build through 2026 as marketing efforts ramp, following the restock of the Apollo plate and fulfillment of backorders for existing DEXA products
• The new lateral oblique Silo product is expected to act as a growth catalyst in the second half of 2026 following its summer launch

• Weather-related disruptions can impact quarterly sales performance, as seen in the slow start to Q1 FY2026
• Ongoing pricing pressure exists in the orthopedic spine implant market
• Expansion of the minimally invasive interventional spine market is growing slower than historical expansion of traditional spine procedures, slowing physician adoption ramp
• The company faces ongoing legal/contractual dispute related to the TFX product out-license, though progress toward resolution is being made
• There is uncertainty around the timeline for resolving FDA questions related to the facet product, even though the product remains approved and no major issues have been identified

Q: What changes are needed for Aurora to hit its 15-20% annual growth target, given relatively flat year-over-year revenue to date? / A: Management states that hitting the growth target requires expanding the sales force into new, previously uncovered regions and backfilling underperforming areas with qualified, experienced sales staff. New hires require a 3-month ramp up period, and contributions to revenue are expected to increase substantially over the second and third quarters. Growth will also be driven by new product launches that expand the company's addressable market. Physician adoption is slow but sticky, as strong clinical outcomes drive repeat use of the company's products.

Q: Beyond sales team expansion, what are the key growth drivers for the remainder of 2026 after the facet product launch delay? / A: The maturing DEXA portfolio, specifically the upcoming full launch of DEXA-L for lumbar procedures, will drive significant growth; the re-released Apollo plate now allows the company to offer a full ACDF procedural solution, eliminating lost sales that occurred when they could not offer a complete package. The new lateral oblique Silo product for SI joint fusion, launching in the second half of 2026, adds an offering for the second most common surgical approach, opening new revenue in the fast-growing SI joint market.

Q: What is the update on the facet product's status with the FDA? / A: The facet product remains fully FDA approved and has not been pulled from the market. The company is in constructive discussions with the FDA to address questions the agency has raised, working with experienced specialized FDA consultants. Management is optimistic that only minor additional biomechanical testing may be required to resolve the inquiry, but no firm timeline is available.

Q: What metrics should investors focus on over the coming quarters, and will management increase investor outreach? / A: Investors should watch for revenue contribution from newly hired salespeople as they complete their ramp up period, especially for new hires with existing spine experience placed into previously uncovered territories. Management confirms they are fully committed to expanding investor outreach, having recently participated in the Roth Conference and engaged with the TMX Group to improve press release distribution. They plan to continue attending investor conferences to share the company's growth story.