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Mindray Medical International Limited (MR)
Q3 2010 Earnings Call
November 9, 2010 8:00 am ET
May Li - Director of IR
Xu Hang - Chairman and Co-CEO
Li Xiting - President and Co-CEO
Ronnie Ede - CFO
Jie Liu - COO
David Gibson - President of Mahwa Operations
Chris Lui - Morgan Stanley
Jack Hu - Deutsche Bank
Katherine Lu - Oppenheimer
Richard Yeh - Citigroup
Shaojing Tong - Bank of America-Merrill Lynch
Wei Du - Goldman Sachs
Ingrid Yin - Brean Murray
Hongbo Lu - Piper Jaffray
Jinsong Du - Credit Suisse
Good day, ladies and gentlemen, and thank you for standing by for Mindray's third quarter 2010 earnings conference call. (Operator Instructions)
I would now like to turn the call over to your host for today's conference, Ms. May Li, Mindray's Director of Investor Relations.
Previous Statements by MR
» Mindray Medical International Limited Q2 2010 Earnings Call Transcript
» Mindray Medical International Ltd. Q1 2010 Earnings Call Transcript
» Mindray Medical International Ltd. Q4 2009 Earnings Call Transcript
Joining today's call are Mr. Xu Hang, our Chairman and Co-CEO; Mr. Li Xiting, our President and Co-CEO; Mr. Ronnie Ede, our Chief Financial Officer; Mr. Jie Liu, our Chief Operating Officer; and Mr. David Gibson, our President of Mahwa Operations.
Our management team will review third quarter and nine months highlights as well as speak to the current financial and market environment in each of our major sales markets, after which management will be available to answer your questions.
Before we continue, please note that this call will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. Mindray does not undertake any obligation to update any forward-looking statements except as required under applicable law.
I will now turn the call over to Mindray's CFO, Mr. Ronnie Ede.
Thank you, May. Good morning and good evening, ladies and gentlemen. Thank you for joining us today for our third quarter 2010 earnings results conference call.
On today's call, I will provide a synopsis of the company's operational performance followed by a discussion of our detailed financial results. Our COO, Mr. Jie Liu; and President of the Mahwa Operations, David Gibson, will then discuss Mindray's operations by region separately, after which our management team will be available to answer your questions.
First, let me provide some operational highlights. Our overall performance in the first quarter achieved an 11.3% year-over-year increase on the topline for a total of $158.3 million. International revenue was strong at $99.2 million, up 17.7% year-over-year, contributing 59% of worldwide sales.
China revenues grew 3.3% year-over-year, not as strong as the prior year largely as a result of continued softening in overall government spending for our medical device purchasing as well as the tier-2 and below hospitals continuing to lack in self-funded purchases.
Gross margin expanded further, primarily reflecting increased synergies by our U.S. and Western European operations.
Operating expenses picked up over last quarter, largely as a result of increased investment in the sales channel. We view it as a necessary investment to accelerate topline growth in the future.
The company recorded limited other income this quarter. Therefore, non-GAAP net income grew 5.8% to $39.5 million, slower than revenue growth. GAAP net income was down year-over-year due to one-time income of $14 million in the third quarter of last year resulting from the termination of the Beckman Coulter project.
Now, let me discuss the revenue position in detail. Continuing the momentum from recent quarters, we captured robust growth in our international markets. International sales were strong at $99.2 million for the quarter compared to $84.3 million for the third quarter of last year, representing an increasing of 17.7%.
Growth in international markets came from all regions. Emerging markets were particularly strong with Latin America and the CIS region growing over 30% and the Middle East doubling its sales compared to the same period last year. Developed markets again recorded double-digit growth.
Overall, consistent execution of expense and strategy in international channels, especially in the developing countries the new product line contribution also mattered, and continued efforts at localization of our onsite operations all helped to drive our excellent performance.
We are encouraged by the continued strong sales trend we are seeing in the international markets, and we intend to invest further in marketing and sales initiatives for the key regions.
Moving on to domestic sales, China sales were $69.1 million for the quarter, up 3.3% year-over-year. Tender sales came in lighter than expected again, growing 40.1% over a soft Q3 last year and stayed flat from last quarter.
We'd like to remind investors that the tender sales remain a small portion of our domestic sales, representing 8% of our total China sales this quarter. Non-tender sales grew 1% year-over-year, and down 5.1% sequentially, representing 92% of China's revenues for the quarter.
Much like the second quarter, the non-tender sales growth was not as strong, due partially to the fact that mid-to-low end segments was not as active as the high end segment. In particular, some of the tier two and below hospitals are still digesting allocation from last year's tenders.