LIBERTY ALL STAR GROWTH FUND INC. Q2 FY2026 earnings call

• Sales Team Transition: Management is actively retooling and strengthening the internal sales force, currently comprising 15 employees, with intentional hiring focused on long-term fit and national coverage. Many new hires are in their first 90 days, meaning hospital approvals and initial sales impacts have not yet fully materialized.
• Spine Franchise Growth: Strong momentum in the DEXA brand, particularly DEXA-C which saw a 66% sales increase. Apollo plates have returned to production and shipped alongside DEXA products, improving product completeness and margins. A four-level Apollo plate was added to support longer constructs.
• CornerLock Partnership: A strategic commercialization alliance with CornerLock has been established. This reciprocal relationship allows Aurora to offer CornerLock’s lateral oblique SI joint technology (the number two approach) to complement its own superior/lateral approach products, providing surgeons with complete flexibility. Joint training and surgeries have already begun.
• Market Expansion: The company is expanding into academic centers to educate future surgeons via residents and fellows. Numerous facility approvals are being secured, supporting record-setting months for DEXA-C and DEXA-L.
• Product Portfolio: Aurora maintains a differentiated portfolio across pain and spine markets, emphasizing proprietary technologies designed for patients with bone deficiencies.

Total revenue for the second quarter of fiscal year 2026 was $3.66 million, representing an 18.7% decrease from $4.5 million in the same quarter of the prior year. Revenue contribution is split between two main segments: the Pain market (SI joint products) and the Spine market (cervical implants/biologics). The Pain market experienced a decline in activity due to sales team retooling and patent disputes, while the Spine market saw increased sales that partially offset the pain sector's drop. Gross profit margin stood at 60.1%, down from 62.2% in the prior year, primarily due to a higher mix of lower-margin distributor sales in the pain market and direct sales in the spine market.

• Full Year Outlook: While specific full-year financial guidance figures were not provided in this transcript, management explicitly stated that they expect second-half revenue levels to improve compared to the first half of the year.
• Operational Expectations: Management expressed confidence that the current sales team structure is now in place to support future growth and that the transition period challenges are temporary, indicating an upward trajectory for operational performance as new hires gain traction.

• Sales Execution Risk: The ongoing transition and retooling of the internal sales team has resulted in disappointing short-term results, with significant territories still open and pending approvals.
• Competitive and Legal Pressures: The company faces increasing competition in the SI joint market and is currently settling disputes regarding the underlying patent holder for siloed TFX products.
• Financial Liquidity: The company ended the quarter with approximately $400,000 in cash and reported a net loss of $835,000, though management believes the capital structure is sufficient for the remainder of the year.

Q: What was the specific performance of spine sales versus the prior year, and how does the CornerLock alliance impact immediate revenue?

A: Spine sales jumped from 26% to 41% of the total mix year-over-year, driven by entry into more academic centers. Regarding CornerLock, management noted that while initial trainings and surgeries have occurred, tangible revenue traction is still in the early stages. However, the partnership is strategically vital as it allows Aurora to offer a complete suite of SI joint solutions covering both lateral and lateral-oblique approaches, creating long-term value through cross-selling opportunities.

Q: How is the DEXA-L product launch progressing, and what infrastructure changes are supporting it?

A: Both DEXA-C and DEXA-L saw unit increases, with DEXA-L gaining ground through improved tooling and instrument sets for anterior approaches. Management highlighted that they are budgeting to build more infrastructure and populate additional sets to support DEXA-L sales. The product is finding its path through roundtable discussions at major congresses like NASS, educating physicians on the benefits of implants matched to patient bone density.

Q: What is the status of the sales team hiring process, and are there untapped territories?

A: The company currently has 15 salespeople, with many new Q1 hires still in their first 90 days, meaning their full impact on sales has not yet hit. Finding experienced reps remains a challenge but is being addressed through targeted interviews. Management described the entire country as a 'blue ocean' opportunity, indicating that even existing markets require additional support, and hiring will continue aggressively across all regions to capture emerging market potential.