GAINESVILLE, Fla.--(BUSINESS WIRE)--Exactech, Inc. (Nasdaq:EXAC), a developer and producer of bone and joint restoration products and biologic solutions for extremities, knee and hip, announced today that revenue for the second quarter of 2017 increased 2% to $67.3 million from $66.1 million in the second quarter of 2016, and 3% on a constant currency basis. Domestic revenue increased 2% to $45.7 million, and international revenue increased 1% to $21.6 million in the second quarter of 2017. Diluted earnings per share for the second quarter was $0.33 based on net income of $4.8 million, compared to second quarter 2016 net income of $4.4 million and diluted earnings per share of $0.31.
Second Quarter Segment Performance
- Extremities revenue increased 19% to $29.5 million from $24.8 million, a 19% constant currency increase
- Knee revenue was flat at $19.6 million, a 1% constant currency increase
- Hip revenue decreased 8% to $11.5 million from $12.5 million, a 7% constant currency decrease
- Other revenue decreased 27% to $6.7 million from $9.2 million, a 26% constant currency decrease. The Other segment includes an aggregation of the former Biologics and Spine segment
Six Months Highlights and Segment Performance
For the first six months of 2017, revenue was $136.8 million, an increase of 4% over $131.4 million for the comparable period last year. On a constant currency basis, revenue for the first half of 2017 was up 5%. Net income for the first six months of 2017 increased 7% to $9.4 million, or $0.65 per diluted share compared to $8.8 million, or $0.62 per diluted share, for the first six months of 2016. First six month product revenue was as follows:
- Extremities revenue increased 20% to $59.4 million, a 20% constant currency increase
- Knee revenue increased 1% to $39.7 million, a 1% constant currency increase
- Hip revenue decreased 1% to $23.6 million, flat on a constant currency basis
- Other revenue decreased 24% to $14.1 million, a 23% constant currency decrease
Management Comment
Exactech CEO and President David Petty said, “For the first half of 2017, we reported a 4% increase in our revenue; however, excluding the impact of the divested spine products from the prior year we reported 7% growth in revenue during the first half of the year. Our hip revenue was negatively impacted by distribution transitions underway in certain markets outside the U.S. We continue to be pleased with the performance of our Extremities segment, which benefited modestly in the quarter from the pilot launch of the Vantage® ankle and also the Equinoxe® Preserve humeral stem. In terms of our product pipeline, additional pilot launches of the ExactechGPS® shoulder application, Alteon® H.A. hip stem and the Truliant® knee system are also going well.
“During the third and fourth quarters we will be building inventory for these systems and hope to move into a limited launch late this year. Our channel development strategy remains important and will be enhanced as we more fully launch the Truliant knee system,” Petty said.
Chief Financial Officer Jody Phillips said, “Gross margins decreased to 68.7% from 69.3% for the second quarter a year ago, as average selling price decreases offset the increases in higher margin extremity sales. Total operating expenses for the quarter remained relatively flat at $39.3 million due to the divestiture of the spine segment being offset by an increase in product launch and development expenses. As a result, we produced a net income increase of 10% to $4.8 million and $0.33 diluted EPS for the second quarter which was in the range of our expectations.”
Looking forward, Exactech narrowed 2017 revenue guidance to $267-$271 million and diluted EPS target to $1.25-$1.29, including the impact of the first quarter $0.02 diluted earnings per share costs related to the spine business transition. On an adjusted basis, the diluted EPS target is $1.27-$1.31. For the third quarter of 2017, the company anticipates revenues of $60.5-$62.5 million and diluted EPS of $0.23-$0.25. The foregoing statements regarding targets for the quarter and full year are forward-looking and actual results may differ materially. These are the company’s targets, not predictions of actual performance.
