Mindray Medical International Limited (MR)

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Mindray Medical International Limited (MR)

Q2 2010 Earnings Call Transcript

August 10, 2010 8:00 am ET

Executives

May Li – Director and Head, IR

Ronnie Ede – CFO

Jie Liu – COO

David Gibson – President, Mahwa Operations

Xu Hang – Chairman and Co-CEO

Analysts

Bin Li – Morgan Stanley

Richard Yeh – Citigroup

Hongbo Lu – Piper Jaffray

Benny Huang [ph] – Bank of America

Jinsong Du – Credit Suisse

Caroline Tiu [ph]

Wei Du – Goldman Sachs

Ingrid Yin – Brean Murray, Carret & Co.

Yale Jen – Maxim Group

Jack Yu [ph] – Deutsche Bank

Presentation

Operator

Good morning, and thank you for standing by for Mindray's second quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to your host for today's call, Ms. May Li, Mindray's director, head of investor relations. Please proceed.

May Li

Hi, everyone. And welcome to Mindray's second quarter 2010 earnings conference call. Our financial results were released last night, and available on the company's Web site as well as on Newswire services. In addition, an archived webcast of this conference call will be available on the Investor Relations section of our Web site at www.mindray.com.

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 second quarter and midyear highlights as well as speak to the current financial and micro-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 US 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.

Ronnie Ede

Thank you, May. Good morning and good evening, ladies and gentlemen. Thank you for joining us today for our second 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, respectively. After which, our management team will be available to answer questions.

We had good overall performance in the past quarter, with a 12% year-over-year increase on the top line and 28.1% on the bottom line. International revenues were a record $106.8 million, up 27% year-over-year, contributing 60% to worldwide sales.

China revenues declined slightly year-over-year as a result of continued softening in government spending for medical device purchasing as well as a top year-over-year comparison to a strong second quarter '09. Margins expanded significantly mainly due to lower sales contribution from China tender sales and increased synergies for our Mindray operations.

On the product development front, we are close to the final phase of the development of our very first MRI system, and are preparing for an FDA approval for the China market. This is an exciting development for Mindray as it were at a new and strategic settlement to our imaging line.

In detail, let me discuss the revenue composition first. Second quarter revenues were $179.2 million, up 12% over the same period last year and 22.9% higher than last quarter.

Continuing the momentum from recent quarters, we captured exceptional growth in our international markets. International sales were a record $6.8 million for the quarter, compared to $84.1 million for the second quarter of last year, representing an increase of 27%. Growth in international markets came from all regions. Emerging markets were particularly strong, led by Latin America with over 18% growth. Developed markets also recorded double-digit growth, both in Western Europe and North America.

Overall, the realignment of our developed market operations; investment in international channels, especially in the developing countries; and, continued effort and localization of our on-site operations all helped to drive our excellent performance. We are pleased with the substantial progress we have made in the international markets. And we'll continue to build on the growth momentum in emerging markets as well as further penetrate the developed markets. We plan to invest more in the second half of the year in marketing and sales initiatives in key international markets.

The strong international growth was partially offset by a slight decline in our domestic China market. China sales were $72.4 million for the quarter, down 4.6% year-over-year and up 17% quarter-over-quarter. Much like the first quarter, our results reflect continued softness in tender sales, which were down 62% year-over-year.

Non-tender sales for the quarter grew 9% year-over-year on top of a strong 2009 comparables and 19% sequentially. They represented approximately 92.4% of China revenue for the quarter. The non-tender sales growth was not as strong due partially to the fact that a lot of market demand in the second quarter came from the higher end larger cap [ph] product segments where we do not operate and from the Tier 3 hospitals along the coastal areas where our sales penetration has historically been lower.

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