Company Address:
Exactech, Inc.
2320 NW 66th Ct.

Gainesville, Florida
32653
USA
 Phone:
(352) 377-1140
 Website:
www.exac.com
 Ticker:
EXAC
 Exchange:
Nasdaq
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2320 NW 66th Ct. • Gainesville • Florida • 32653 • USA • www.exac.com
Investor Contact: Frank N. Hawkins, Jr. or Julie Marshall · Hawk Associates Inc. · (305) 451-1888 · www.hawkassociates.com
Q2 Revenue Up 10%; Net Income Up 14%, EPS $0.23. Sets Six New Products for Launch in 2010; Robust Product Pipeline for 2011. Acquires Minimally Invasive Spine Reconstruction Portfolio

Exactech is a pure play orthopaedic competitor that is gaining market share in the rapidly expanding global biomedical device industry. The company's products are used in the restoration of bones and joints that have deteriorated as a result of injury or disease such as arthritis.

Exactech develops, manufactures, markets, distributes and sells its orthopaedic implant devices, including knee, shoulder, and hip implant systems, related surgical instrumentation, spine products and biologic services to hospitals and physicians in the United States and internationally in over 30 countries.

Founded and led by an orthopaedic surgeon, the company has built its success on its customer-centric culture. Feedback from its surgeon customers has helped Exactech develop a pipeline of innovative products that improve patient outcomes.

Company Overview

Q2 Highlights and Segment Performance


• Q2 revenue increased 10% to $47.6 M
• GAAP net income increased 14% to $3.0 M, EPS $0.23
• Knee implant revenue increased 2% to $19.4 M
• Hip implant revenue increased 9% to $7.3 M
• Biologic & Spine revenue decreased 1% to $6.8 M
• Extremity implant revenue increased 40% to $7.1 M
• Other products revenue increased 22% to $7.0 M

Differentiators

FDA-CLEARED PRODUCTS AND SERVICES

It is estimated that there are nearly one million knee replacement procedures performed worldwide each year. To help meet this demand, Exactech continues to develop next generation knee systems that respond to the needs of the hospital and surgical community. Its Optetrak® differentiated knee implant products provide about 41% of the company's current revenue.

Representing about 15% of the company’s revenues, the Equinoxe® shoulder implant system is Exactech’s fastest growing product line.

Hip products account for about 15% of company revenues, and use industry-leading materials such as ceramic bearing surfaces and enhanced polyethylene for superior wear performance.

Exactech’s biologic and spine products together represent about 14% of revenue. The company began distribution of biologic tissue materials in 1998, and entered the spine market with an acquisition of a spine products company in early 2008. Exactech offers a variety of allograft tissue material for grafting and repairing bone defects, and a spine platform that provides a portfolio of spine products with the potential to expand domestically and internationally.

Surgeon input and clinician feedback is an important aspect in developing innovative new designs in implant technology. Recent News
Exactech Acquires Minimally Invasive Spine Reconstruction Portfolio
Exactech To Present at Upcoming Investor Conferences
Exactech Q2 Revenue Up 10%; Net Income Up 14%, EPS $0.23
Exactech Schedules Second Quarter 2010 Earnings Release and Conference Call
Exactech to Present at the 2010 Noble Financial Equity Conference on June 7

    Risk Factors
  • Market acceptance of new products
  • Significant resources of larger competitors
  • New government taxes
  • Partial dependency on third-party manufacturers
  • Medical device industry DOJ investigation

The Outlook

For the second quarter of 2010, revenue was $47.6 million, a 10% increase over $43.3 million in the second quarter of 2009. Net income increased 14% to $3.0 million, or $0.23 per diluted share, compared to $2.6 million, or $0.20 per diluted share, in the same quarter a year ago. Net income for the quarter, excluding pre-tax legal expenses and costs of $0.4 million related to the ongoing Department of Justice (DOJ) inquiry, was $3.2 million or $0.25 EPS.

The company said its second quarter performance was excellent in several of its market segments as the company's growth rate was again above that of the industry. Sales and marketing transitions underway in some of its overseas markets slowed growth in knee sales, but management believes that despite some near term dislocation, the company is strengthening its ability to grow overseas business and that future results will reflect that. Sales in the quarter were boosted by the growing acceptance of the Novation Hip System and continued strong sales of extremities products led by the Equinoxe® shoulder.

The acquisition of Brighton Partners in Q2 was an important event allowing Exactech to directly control its sole source supplier of the proprietary direct compression molded polyethylene bearings used exclusively in the Optetrak® knee replacement system, our largest product.

For the quarter, U.S. sales rose 12% to $32.8 million compared with $29.2 million. International sales grew 5% to $14.8 million but decreased to 31% of total sales from 33% of total sales for the second quarter of 2009. As a percentage of sales, international sales in the first six months of 2010 increased to 32% from 31% in the first six months of the prior year.

The pipeline of new products continues to be very robust. Exactech has six new products set for launch by the end of the year and another 14 in the pipeline for 2011.

Looking forward, Exactech updated its revenue targets for 2010 to the range of $191 million to $197 million and reaffirmed its target for diluted EPS for the year 2010 in the range of $0.92 to $0.98. For the third quarter ending September 30, 2010, the company targets revenue in the range of $43 million to $46 million and diluted EPS in the range of $0.20 to $0.22. These are U.S. GAAP EPS target ranges that include the impact of DOJ inquiry and compliance costs. 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.

Management
Chairman and Chief Executive Officer-
William Petty, M.D.

President and Director-
David W. Petty

CFO-
Joel C. Phillips, CPA

EVP of Research and Development, Director-
Gary J. Miller, Ph.D.

VP of Administration and Human Resources, Secretary-
Betty B. Petty

Senior Vice President, General Manager – Biologics Division-
Bruce Thompson

Director-
James G. Binch

Director-
Albert H Burstein, Ph.D.

Director-
R. Wynn Kearney, Jr. , M.D.

Director-
William B. Locander, Ph.D.

Director-
Paul E. Metts, CPA

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