Exactech, Inc. (EXAC)
Q2 2010 Earnings Conference Call
August 4, 2010 10:00 AM ET
Bill Petty – Chairman and CEO
Jody Phillips – CFO
Jeff Johnson – Robert W. Baird
James Sidoti – Sidoti & Company
Bill Plovanic – Canaccord Wealth Management
Robert Gold – Brigantine Advisors
James Terwilliger – Duncan Williams
Jim Genral – Jeffrey Investment and Research
Good day ladies and gentlemen, thank you for standing by. Welcome to the Exactech Incorporated second quarter 2010 earnings conference call. During today’s presentation, all parties will be in a listen-only mode and following the presentation, the conference will be opened for questions.
Now I would now like to hand the conference over to Dr. Bill Petty.
Good morning, thank you for joining for us and thank you for your interest. Jody Phillips is here with me. David Petty who is usually with us is not here today, he is away.
I will begin by reading the disclaimer. This release contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934. They represent the company’s expectations or beliefs concerning future events of the company’s financial performance.
These forward-looking statements are further qualified by important factors that could cause results to differ materially from those in the forward-looking statements. These factors include the effect of competitive pricing, the company’s dependence on the ability of third-party manufacturers to produce components on a basis, which is cost-effective to the company, market acceptance of the company’s products, the effects of government regulation and other possibilities. Results actually achieved may differ materially from the expected results included in the statements.
For the second quarter of 2010, Exactech is pleased to report revenue of $47.6 million. This is an increase of 10% compared to revenue of $43.3 million in the second quarter of 2009. Net income was up 14% to $3 million compared to $2.6 million in ‘09. This results in earnings per diluted share of $0.23 in 2010 compared to $0.20 in 2009. If we exclude the expenses of $400,000 related to the DOJ inquiry, net income for the quarter was $3.2 million or $0.25 per diluted share.
To look a little bit at our overall segment performance for the quarter, our knee implant revenue increased 2% to $19.4 million. Hip implant revenue increased 9% to $7.3 million. Biologic and spine revenue actually decreased 1% to $6.8 million. Extremity implant revenue was up 40% to $7.1 million and our other products revenue increased 22% to $7 million.
Now I want to look a little bit at the first half of the year.
For the first six months of the year revenue was $96.7 million, which is an increase of 12% over $86.6 million for Q2 in ‘09. Net income in 2010 for the first half increased 23% to $6.3 million compared to $5.1 million for the first six months of 2009. This represents an earnings per share of $0.48 for the first half in 2010 compared to $0.40 for the first six months of 2009. Without the DOJ expenses, net income for the six months were $6.6 million or $0.51 per diluted share.
The six segment performance, knee implant revenue increased 8% to $40.3 million from $37.4 million. Hip implant revenue increased 5% to $13.9 million from $13.2 million. Biologic and spine revenue increased 2% to $14.2 million from $13.9 million. Extremity implant revenue was up 30% to $14.2 million from $10.9 million in 2009 and our other products revenue increased 27% to $14.1 million compared to $11.1 million in the first half of 2009.
To compare the domestic and the outside U.S. business, for the quarter our U.S. sales rose 12% to $32.8 million compared to $29.2 million in ‘09. Our international sales grew 5% to $14.8 million and this represents 31% of our total sales.
Now for domestic versus U.S. for the six months or the first half, our U.S. sales were up 9% to $65.6 million compared to $60 million in 2009 and for the first six months outside the U.S., our sales increased 17% from $26.6 million to $31.1 million in this year. Sales for the first six months outside the U.S. represented 32% of the total.
We are pleased with our overall performance, business model transition is underway and some of our overseas markets slowed our growth especially in knee sales during the quarter, despite some near-term dislocation created by these changes, we are taking these steps to strengthen our ability to grow our business outside the U.S. believe that future results will reflect that.
Rebound in our hip sales was stimulated by growing acceptance of our Novation hip system. Sales of our extremities products led by Equinoxe Shoulder continued to be very strong.
The key event for the quarter was the acquisition of Brighton Partners. Brighton is the sole source supplier of the proprietary direct compression molded polyethylene bearings used in our Optetrak knee system. Polyethylene has in the past and will in the future provide negligible wear rates while enhancing mechanical properties of the material. These characteristics provide our surgeon customers and their patients a long lasting knee replacement bearing.