Mindray Announces Second Quarter 2009 Financial Results
"Mindray continued to generate solid operational performance and earningsgrowth in the face of a global marketplace that remains very challenging,"commented Xu Hang, Mindray's chairman and co-chief executive officer. "Theongoing realignment of core competencies within each region and continuedintegration of our Mahwah operations have and will continue to enable us toimprove our cost structure and operational efficiency, while bringing newproducts to market and maintaining our competitive position in themarketplace."
Mindray reported net revenues of $160.1 million for the second quarter of2009, a 9.9% increase from $145.7 million in the second quarter of 2008. Netrevenues generated in China in the second quarter of 2009 increased 31.3% to$76.0 million from $57.9 million in the second quarter of 2008, while netrevenues generated in international markets in the second quarter of 2009decreased 4.2% to $84.1 million from $87.8 million in the second quarter of2008.
Performance by Segment
Patient Monitoring & Life Support Products: Patient monitoring & lifesupport products segment revenues increased 2.1% to $69.1 million from $67.6million in the second quarter of 2008. The patient monitoring & life supportproducts segment contributed 43.2% to the total net revenues in the secondquarter of 2009.
In-Vitro Diagnostic Products: In-vitro diagnostic products segmentrevenues increased 12.8% to $40.0 million from $35.5 million in the secondquarter of 2008. The in-vitro diagnostic products segment contributed 25.0% tothe total net revenues in the second quarter of 2009.
Medical Imaging Systems: Medical imaging systems segment revenuesincreased 16.5% to $41.9 million from $36.0 million in the second quarter of2008. The medical imaging systems segment contributed 26.1% to the total netrevenues in the second quarter of 2009.
Others: Other revenues, which are primarily comprised of service feescharged for post warranty period repair services, increased 37.4% to $9.1million from $6.6 million in the second quarter of 2008. Other revenuescontributed 5.7% to the total net revenues in the second quarter of 2009.
The segment revenue amounts discussed above include shipping and handlingfees charged to customers.
Second quarter 2009 gross profit was $91.6 million, an 18.9% increase from$77.0 million in the second quarter of 2008. Second quarter 2009non-GAAP gross profit was $93.4 million, a 16.9% increase from $79.9 millionin the second quarter of 2008. Second quarter 2009 gross margin was 57.2%compared to 52.8% in the second quarter of 2008 and 55.7% in the first quarterof 2009. Non-GAAP gross margin was 58.3% in the second quarter of 2009compared to 54.8% in the second quarter of 2008 and 56.9% in the first quarterof 2009.
Selling expenses for the second quarter of 2009 were $26.4 million, or16.5% of the total net revenues, compared to 14.2% in the second quarter of2008 and 16.2% in the first quarter of 2009. Non-GAAP selling expenses for thesecond quarter of 2009 were $24.9 million, or 15.5% of the total net revenues,compared to 13.3% in the second quarter of 2008 and 15.0% in the first quarterof 2009.
General and administrative expenses for the second quarter of 2009 were$11.4 million, or 7.1% of the total net revenues, compared to 6.6% in thesecond quarter of 2008 and 6.6% in the first quarter of 2009. Non-GAAP generaland administrative expenses for the second quarter of 2009 were $10.7 million,or 6.7% of the total net revenues, compared to 6.1% in the second quarter of2008 and 5.7% in the first quarter of 2009.
Research and development expenses for the second quarter of 2009 were$14.7 million, or 9.2% of the total net revenues, compared to 8.5% in thesecond quarter of 2008 and 11.0% in the first quarter of 2009. Non-GAAPresearch and development expenses for the second quarter of 2009 were $13.9million, or 8.7% of the total net revenues, compared to 7.9% in the secondquarter of 2008 and 10.4% in the first quarter of 2009.
Total share-based compensation expenses, which were allocated to cost ofrevenues and related operating expenses, were $2.6 million in the secondquarter of 2009 compared to $3.0 million in the first quarter of 2009 and $2.4million in the second quarter of 2008.
Operating income was $39.0 million in the second quarter of 2009, a 40.2%increase from $27.8 million in the second quarter of 2008. Non-GAAP operatingincome in the second quarter of 2009 was $43.9 million, a 9.8% increase from$40.0 million in the second quarter of 2008. Operating margin was 24.4% in thesecond quarter of 2009 compared to 19.1% in the second quarter of 2008 and21.9% in the first quarter of 2009. Non-GAAP operating margin was 27.4% in thesecond quarter of 2009 compared to 27.5% in the second quarter of 2008 and25.9% in the first quarter of 2009.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Second quarter 2009 EBITDA increased 38.8% year-over-year to $46.7 millionfrom $33.6 million in the second quarter of 2008 and increased 31.2% from$35.6 million in the first quarter of 2009.
Net income increased 37.2% year-over-year to $33.0 million from $24.1million in the second quarter of 2008. Non-GAAP net income increased 7.5%year-over-year to $37.8 million from $35.2 million in the second quarter of2008. Net margin was 20.6% in the second quarter of 2009 compared to 16.5% inthe second quarter of 2008 and 18.9% in the first quarter of 2009. Non-GAAPnet margin was 23.6% in the second quarter of 2009 compared to 24.2% in thesecond quarter of 2008 and 22.7% in the first quarter of 2009. Second quarter2009 income tax expense was $6.3 million representing an effective tax rate of16.1%.
Second quarter 2009 basic and diluted earnings per share were $0.30 and$0.29, respectively, compared to $0.22 and $0.21 in the second quarter of 2008.Basic and diluted non-GAAP earnings per share were $0.35 and $0.34,respectively, compared to $0.33 and $0.31 in the second quarter of 2008.Shares used in the computation of diluted earnings per share for the secondquarter 2009 were 112.6 million.
Other Select Data
Average accounts receivable days outstanding were 54 days in the secondquarter of 2009 compared to 60 days in the first quarter of 2009. Averageinventory days were 82 days in the second quarter of 2009 compared to 88 daysin the first quarter of 2009. Average accounts payable days outstanding were59 days in the second quarter of 2009 compared to 58 days in the first quarterof 2009. Mindray calculates the above working capital days using the averageof beginning and ending balances of the quarter. Historically, the companyused the average of beginning of the year and ending of the quarter balances.Mindray believes this new method provides more useful information onunderlying operations.
As of June 30, 2009, the company had $284.5 million in cash and cashequivalents and restricted cash, compared to $261.2 million as of March 31,2009. Net cash generated from operating activities and net cash outflow fromcapital expenditures during the quarter were $34.5 million and $12.6 million,respectively.
As of June 30, 2009, the company had 5,660 employees.
First Half 2009 Results
Mindray reported net revenues of $294.2 million in the first half of 2009,representing a 26.2% increase from $233.1 million in the first half of 2008.
First half 2009 EBITDA increased 26.7% year-over-year to $82.3 millionfrom $64.9 million in the first half of 2008 and increased 2.9% from $79.9million in the second half of 2008.
First half 2009 net income increased 18.8% year-over-year to $58.4 millionfrom $49.1 million in the first half of 2008. First half 2009 non-GAAP netincome increased 8.4% year-over-year to $68.4 million from $63.0 million inthe first half of 2008.
First half 2009 diluted earnings per share increased 19.9% year-over-yearto $0.52 from $0.43 in the first half of 2008. First half 2009 non-GAAPdiluted earnings per share increased 9.4% to $0.61 from $0.56 in the firsthalf of 2008.
Business Outlook for Full Year 2009
Mindray maintains its current outlook for the full year 2009, whichincludes:
The company's practice is to provide guidance on a full year basis only.This forecast reflects Mindray's current and preliminary views, which aresubject to change.
"Based on what we continue to see from a world economy and hospitalspending perspective, we are maintaining our guidance for the year," commentedMr. Li Xiting, Mindray's president and co-chief executive officer. "Weexperienced excellent growth in China through the first half of the year andexpect that to continue, as we look forward to the government continuing withits strong spending in the second half of 2009. China still represents ourbest growth prospect this year. International growth is mixed, with Africa,Asia and the Middle East performing well; distributor funding and hospitalspending issues, however, continue to affect our other regions. Notsurprisingly, the U.S. hospital market remains difficult to predict, ascapital spending remains constrained and healthcare reform has yet to beestablished. That said, we remain firm in our belief that Mindray's uniquevertically integrated business model, excellent financial position and focuson core competencies within each region, provide us with key advantages inthese fast-changing markets."
Conference Call Information
Mindray's management will hold an earnings conference call at 8:00 AM onAugust 11, 2009 U.S. Eastern Time (8:00 PM on August 11, 2009 Beijing/HongKong Time)
A replay of the conference call may be accessed by phone at the followingnumbers until August 22, 2009.
Additionally, a live and archived webcast of this conference call will beavailable on the Investor Relations section of Mindray's website athttp://ir.mindray.com .
Use of Non-GAAP Financial Measures
Mindray provides gross profit, R&D expenses, selling expenses, general andadministrative expenses, operating income, EBITDA, net income and earnings pershare on a non-GAAP basis that excludes share-based compensation expense andacquired intangible assets amortization expense, in progress research anddevelopment expenses, as well as termination payments, and all net of relatedtax impact, to enable investors to better assess the company's operatingperformance. The non-GAAP measures described by the company are reconciled tothe corresponding GAAP measure in the exhibit below titled "Reconciliations ofnon-GAAP results of operations measures to the nearest comparable GAAPmeasures."
The company has reported for the second quarter of 2009 and providedguidance for full year 2009 earnings per share on a non-GAAP basis. Each ofthe terms as used by the company is defined as follows:
The company computes its non-GAAP financial measures using the sameconsistent method from quarter to quarter. The company notes that thesemeasures may not be calculated on the same basis of similar measures used byother companies. Readers are cautioned not to view non-GAAP results on astand-alone basis or as a substitute for results under GAAP, or as beingcomparable to results reported or forecasted by other companies, and shouldrefer to the reconciliation of GAAP results with non-GAAP results for thethree months and six months period ended June 30, 2008 and 2009, respectively,in the attached financial information.
Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements," including thoserelated to the company's market performance, the business outlook for thefiscal year 2009 with respect to net revenues, Non-GAAP EPS, capitalexpenditure, share based compensation and amortization of intangible assets,the company's ability to grow in various geographic markets, to adapt tochanging market environments, to take advantage of cost advantages, to capturegrowth opportunities, to improve cost structures and operational efficienciesand to benefit from government spending in China. These statements are nothistorical facts but instead represent only our belief regarding future events,many of which, by their nature, are inherently uncertain and outside of ourcontrol. It is possible that our actual results and financial condition andother circumstances may differ, possibly materially, from the anticipatedresults and financial condition indicated in these forward-looking statements.Readers are cautioned that these forward-looking statements are onlypredictions and may differ materially from actual future events or results dueto a variety of factors, including but not limited to: the expected growth ofthe medical device market in China and internationally; relevant governmentpolicies and regulations relating to the medical device industry; marketacceptance of our products; our expectations regarding demand for our products;our ability to expand our production, our sales and distribution network andother aspects of our operations; our ability to stay abreast of market trendsand technological advances; our ability to effectively protect ourintellectual property rights and not infringe on the intellectual propertyrights of others; competition in the medical device industry in China andinternationally; and general economic and business conditions in the countriesin which we operate. The financial information contained in this releaseshould be read in conjunction with the consolidated financial statements andnotes thereto included in our public filings with the Securities and ExchangeCommission. For a discussion of other important factors that could adverselyaffect our business, financial condition, results of operations and prospects,see "Risk Factors" beginning on page 5 of our annual report on Form 20-F,filed on May 8, 2009. Our results of operations for the second quarter of 2009and for fiscal year 2009 are not necessarily indicative of our operatingresults for any future periods. Any projections in this release are based onlimited information currently available to us, which is subject to change.Although such projections and the factors influencing them will likely change,we will not necessarily update the information. Such information speaks onlyas of the date of this release.
All references to "shares" are to our ordinary shares, which are dividedinto two classes, Class A and Class B. Each of our American Depositary Shares,which trade on the New York Stock Exchange, represents one Class A ordinaryshare.
We are a leading developer, manufacturer and marketer of medical devicesworldwide. We maintain global headquarters in Shenzhen, China, U.S.headquarters in Mahwah, New Jersey and multiple sales offices in majorinternational markets. From our main manufacturing and engineering base inChina and through our worldwide distribution network, we are able to supplyinternationally a broad range of products across three primary businesssegments, comprised of patient monitoring and life support products, in-vitrodiagnostic products and medical imaging systems. For more information, pleasevisit http://ir.mindray.com .Highlights for Second Quarter and First Half 2009 -- Second quarter 2009 net revenues were $160.1 million, an increase of 9.9% over the second quarter of 2008 and 19.3% over the first quarter of 2009. -- Fully diluted EPS in the second quarter of 2009 was $0.29, a 38.8% increase from the second quarter of 2008 and a 29.8% increase from the first quarter of 2009. -- EBITDA in the second quarter of 2009 was $46.7 million, a 38.8% increase from the second quarter of 2008. -- Gross margin in the second quarter of 2009 was 57.2%, up from 52.8% in the second quarter of 2008 and 55.7% in the first quarter of 2009. -- Net operating cash generated during the second quarter of 2009 was $34.5 million. -- Working capital days were 77 in the second quarter of 2009. -- A total of five products were launched in the first half of 2009. -- Mindray USA expanded its Group Purchase Organization ("GPO") contract base; the DPM product line has now been added to contracts in five of the largest GPOs, providing access to this product line to over 85% of the U.S. hospitals and surgery centers.
SOURCE Mindray Medical International Limited
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