Q1 Net Income $4.6 Million; Diluted EPS
$0.32
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
first quarter of 2017 increased 6% to $69.5 million from $65.3
million in the first quarter of 2016, and 7% on a constant currency
basis. Domestic revenue increased 7% to $47.7 million and
international revenue increased 5% to $21.8 million in the first
quarter of 2017. Diluted earnings per share for the first quarter
was $0.32 based on net income of $4.6 million, compared to first
quarter 2016 net income of $4.4 million and diluted earnings per
share of $0.31.
First Quarter Segment Performance
- Extremity revenues increased 21% to
$30.0 million from $24.8 million, a 21% constant currency
increase
- Knee revenue increased 1% to $20.0
million from $19.8 million, a 1% constant currency increase
- Hip revenue increased 6% to $12.1
million from $11.4 million, a 6% constant currency increase
- Other revenues decreased 20% to $7.3
million from $9.2 million, a 19% constant currency decrease. The
Other segment includes an aggregation of the former Biologics and
Spine segment
Management Comment
Exactech CEO and President David Petty said, “With three new
revision systems now in full launch, we leveraged our sales channel
and improvements in our supply chain to deliver a strong start to
2017. The innovative features of our Optetrak Logic® CC revision
knee and Alteon® Monobloc hip systems continue to attract new
surgeons, improve patient outcomes and post growth in those
segments. Our extremities business continued to accelerate,
attracting record attendance at our global medical education
programs. At the ten-year clinical milestone, our Equinoxe® reverse
platform shoulder system remains a core driver of customer
satisfaction while new products like our humeral reconstruction
prosthesis contribute to a robust new customer pipeline.
“The sales increase of 6% to $69.5 million was above our
expectations as domestic revenue increased 7% to $47.7 million, and
excluding the impact of the divested US spine assets during the
quarter, domestic sales increased 11%. International revenue
increased 5% to $21.8 million, and a 7% increase on a constant
currency basis,” Petty said.
Chief Financial Officer Jody Phillips said, “Gross margins
increased to 70% from 69% for the first quarter a year ago due to
strength in our US extremities business. Total operating expenses
for the quarter increased 10% to $42.5 million primarily due to
heavy investments we continue to make in our product development
pipeline with research and development expenses increasing 23%
during the quarter. Sales and marketing expenses increased 7% to
$25.1 million due to variable selling expenses and investments in
our medical education and training programs. Transition costs
associated with divestiture of our spine assets were less than
originally projected at a total of $0.5 million resulting in a
$0.02 diluted EPS impact on the quarter and as a result we produced
a net income increase of 4% to $4.6 million for the quarter."
Looking forward, Exactech updated 2017 revenue guidance to
$266-$272 million and increased diluted EPS target to $1.24-$1.30,
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 $1.26-$1.32. For the
second quarter of 2017, the company anticipates revenues of
$66.5-$68.5 million and diluted EPS of $0.32-$0.34. 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.
The financial statements are below.
Conference Call
The company will hold a conference call with CEO David Petty and
key members of the management team Wednesday, April 26th at 10:00
a.m. Eastern Time. The call will cover Exactech’s first quarter
2017 results. Mr. Petty will open the conference call and a
question-and-answer session will follow.
To participate in the call, dial 877-874-1569 any time after
9:50 a.m. Eastern Time on April 26. International and local callers
should dial 719-325-4888. A live webcast of the call will be
available at http://www.hawkassociates.com/profile/exac.cfm or
http://public.viavid.com/index.php?id=123876.
About Exactech
Based in Gainesville, Fla., Exactech develops and markets
orthopaedic implant devices, related surgical instruments and
biologic materials and services to hospitals and physicians. The
company manufactures many of its orthopaedic devices at its
Gainesville facility. Exactech’s orthopaedic products are used in
the restoration of bones and joints that have deteriorated as a
result of injury or diseases such as arthritis. Exactech markets
its products in the United States, in addition to more than 30
markets in Europe, Latin America, Asia and the Pacific. Additional
information about Exactech, Inc. can be found at
http://www.exac.com. Copies of Exactech’s press releases, SEC
filings, current price quotes and other valuable information for
investors may be found at http://www.exac.com and
http://www.hawkassociates.com.
An investment profile on Exactech may be found at
http://www.hawkassociates.com/profile/exac.cfm. To receive future
releases in e-mail alerts, sign up at
http://www.hawkassociates.com/about/alert.
This release contains various forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, which 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 actual 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 and the effects of government regulation. Results actually
achieved may differ materially from expected results included in
these statements.
EXACTECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) (audited) March 31,
December 31, 2017 2016
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 11,173 $
13,052 Trade receivables, net of allowances of $1,641 and $1,473
58,596 53,051 Prepaid expenses and other assets, net 4,119 3,075
Income taxes receivable 2,487 2,140 Inventories, current 66,189
65,264 Assets held for sale — 6,477 Total current
assets 142,564 143,059 PROPERTY AND EQUIPMENT: Land 4,484
4,474 Machinery and equipment 42,447 42,034 Surgical instruments
139,739 132,134 Furniture and fixtures 4,864 4,700 Facilities
21,804 21,726 Projects in process 5,457 2,473 Total
property and equipment 218,795 207,541 Accumulated depreciation
(104,473 ) (100,234 ) Net property and equipment
114,322 107,307 OTHER ASSETS: Deferred financing and
deposits, net 800 968 Equity investment 2,004 2,047 Deferred tax
asset — 887 Non-current inventory 13,107 15,723 Product licenses
and designs, net 8,860 9,102 Patents and trademarks, net 769 821
Customer relationships, net 488 476 Goodwill 14,181
13,819 Total other assets 40,209 43,843
TOTAL
ASSETS $ 297,095 $ 294,209
LIABILITIES AND
SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $
16,738 $ 17,566 Income taxes payable 1,425 780 Accrued expenses
14,441 11,832 Other current liabilities 2,805 2,927
Total current liabilities 35,409 33,105 LONG-TERM
LIABILITIES: Deferred tax liabilities 2,458 1,773 Long-term debt,
net of current portion 16,000 20,000 Other long-term liabilities
2,951 5,089 Total long-term liabilities 21,409
26,862 Total liabilities 56,818 59,967 COMMITMENTS
AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock 145 144
Additional paid-in capital 88,998 87,319 Treasury Stock (3,042 )
(3,042 ) Accumulated other comprehensive loss, net of tax (8,840 )
(8,611 ) Retained earnings 163,016 158,432 Total
shareholders’ equity 240,277 234,242
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY $ 297,095 $ 294,209
EXACTECH, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (in thousands, except per share
amounts) (Unaudited)
Three Month Periods
Ended March 31,
2017 2016 NET SALES $ 69,482 $ 65,298
COST OF GOODS SOLD 20,641 20,368 Gross profit 48,841 44,930
OPERATING EXPENSES: Sales and marketing 25,053 23,319
General and administrative 6,536 5,914 Research and development
6,224 5,070 Depreciation and amortization 4,659 4,324 Total
operating expenses 42,472 38,627 INCOME (LOSS) FROM
OPERATIONS 6,369 6,303 OTHER INCOME (EXPENSE): Interest income 3 4
Other income (loss) 143 40 Interest expense (226 ) (262 ) Foreign
currency exchange gain 562 494 Total other income (expense) 482 276
INCOME BEFORE INCOME TAX AND EQUITY IN LOSS OF
INVESTEE 6,851 6,579 PROVISION FOR INCOME TAXES 2,224 2,177
INCOME BEFORE EQUITY IN LOSS OF INVESTEE 4,627 4,402
EQUITY IN LOSS OF INVESTEE, NET OF TAX (43 ) —
NET INCOME $ 4,584 $ 4,402 BASIC EARNINGS PER SHARE $
0.32 $ 0.31 DILUTED EARNINGS PER SHARE $ 0.32 $ 0.31
SHARES - BASIC 14,272 14,057 SHARES - DILUTED 14,454
14,173
Non-GAAP Disclosure and Reconciliation
We present certain non-GAAP results as a supplement to our
financial results based on GAAP, as we believe it is useful to
exclude certain items in order to focus on what we regard to be a
more reliable indicator of the underlying operating performance of
our business. Because we operate internationally, we present the
percentage change in sales by reporting segment on a constant
currency basis, which is a non-GAAP financial measure. We calculate
this change on a constant currency basis by translating current
period sales at the comparable average historical exchange rates
for the same period in the prior year. We believe that presenting
the percentage change in sales on a constant currency basis assists
in the understanding of actual sales fluctuations by excluding the
impact of foreign currency fluctuations.
Additionally, we report on a non-GAAP basis adjusted sales,
gross margin, operating expenses, income, and diluted earnings per
share excluding charges related to the spine assets we sold January
2017. We believe the exclusion of spine sales and costs provides
the reader with more comparable financials to better analyze the
reported periods. The following items have been adjusted:
- Sales, cost of goods sold, and
operating expenses from our spine products
- Transition charges related to the sale
of our spine assets
- Personnel and severance costs related
to the transition
Three Months March 31, 2017
Three Months March 31, 2016
Change %
Reported
US Spine Adjusted Reported
US Spine Adjusted
Reported
Adjusted Domestic sales $ 47,673 $ 282 $ 47,391 $
44,573 $ 1,798 42,775 International sales 21,809 — 21,809 20,725 —
20,725 Total sales 69,482 282 69,200 $ 65,298 $ 1,798 63,500 6.4 %
9.0 % Gross profit 48,841 187 48,654 44,930 1,220 43,710 8.7
11.3 Operating expense 42,472 702 41,770 38,627 1,472 37,155
10.0 12.4 Other income 482 — 482 276 — 276 74.6 74.6 Income
before income tax and equity in loss of investee 6,851 (515 ) 7,366
6,579 (252 ) 6,831 4.1 6.3 Income tax 2,224 (137 ) 2,361
2,177 (94 ) 2,271 2.2 3.9 Equity in loss of investee (43 ) — (43
)
— — — Net income (loss) $ 4,584 $ (378 ) $ 4,962 $ 4,402 $ (158 ) $
4,560 4.1 8.8 Diluted EPS $ 0.32 $ (0.02 ) $ 0.34 $ 0.31 $
(0.01 ) $ 0.32
We also provide adjusted forward looking guidance on diluted
earnings per share for the full year for 2017. We believe this
adjusted guidance will assist in comparative measures. The
following reconciles the guidance ranges to expected guidance on a
GAAP basis:
Twelve Months
Ended December 31, 2017 Expected diluted EPS range on
GAAP basis $1.24 - $1.30 Adjustment: Spine asset divestiture
0.02 Adjusted total diluted EPS range $1.26-$1.32
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version on businesswire.com: http://www.businesswire.com/news/home/20170425006773/en/
Exactech, Inc.Investor contactsJody Phillips,
352-377-1140Executive Vice President of Finance &Chief
Financial OfficerorHawk AssociatesJulie Marshall or Frank Hawkins,
305-451-1888EXAC@hawkassociates.comorMedia contactPriscilla
Bennett, 352-377-1140Vice President, Corporate & Marketing
Communication
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