Mindray Medical International Limited (MR)

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Mindray Medical International Limited (MR)

Q2 2011 Earnings Conference Call

August 9, 2011 08:00 ET


Cathy Gao – Deputy Manager of Investor Relations

May Li – Deputy Chief Financial Officer

Jie Liu – Chief Financial Officer and Chief Operating Officer

David Gibson – President, North America Operations


Ingrid Yin – Oppenheimer

Bin Li – Morgan Stanley

Shaojing Tong – Bank of America

Jack Hu – Deutsche Bank

Johnny – Maxim Group

Richard Yeh – Citigroup

Jinsong Du – Credit Suisse

Wei Du – Goldman Sachs

Anthony Petrone – Jeffries

Katherine Lu – Cowen & Company

Junaid Husain – Ticonderoga Securities

Gideon Lo – Nomura

Erica So – UBS



Good morning everyone. Thank you for standing by and welcome to Mindray’s Second Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only. After management’s prepared remarks, we will conduct a question-and-answer session. Today’s conference is being recorded for replay purposes. 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 conference, Ms. Cathy Gao, Mindray’s Deputy Manager of Investor Relations. Please proceed, Ms. Gao.

Cathy Gao – Deputy Manager of Investor Relations

Hi, everyone, and welcome to Mindray’s 2011 second quarter conference call. Our financial results were released last night and are available on the company’s website, 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 website 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. Jie Liu, our Chief Financial Officer and Chief Operating Officer; Mr. David Gibson, our President of North America Operations; Mr. Alex Lung and Ms. May Li, our Deputy Chief Financial Officers.

Our management team will review second quarter highlights, as well as speak to the current financial and the market environments of 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. Statements made and views expressed here today that are not historical facts or forward-looking statements. You should be cautioned that forward-looking statements are only predictions and may involve inherent risks and uncertainties. As such our actual results may be materially different from the statements made and views expressed here today due to a variety of factors. A number of such risks, uncertainties, and factors are outlined in our public filings with the SEC. In particular, please refer to risk factors beginning on page four of our Annual Report on Form 20-F. Any projections made here today are based only on limited information currently available to us, which is subject to change. Mindray does not undertake any obligations to update any forward-looking statements except as required under applicable laws.

I will now turn the call over to Mindray’s Deputy CFO, Ms. May Li.

May Li Deputy Chief Financial Officer

Thank you, Cathy. Good morning and good evening ladies and gentlemen. Thank you for joining us today for our 2011 second quarter earnings results conference call.

First, I will provide an overview of the company’s overall financial results of the quarter. Mr. Jie Liu will then discuss our performance in all geographical regions outside of North America. Mr. David Gibson will then discuss our North America operations. Before opening the call to questions, Jie will discuss a couple of company updates as well as our 2011 outlook.

Continuing the sales momentum, we had another good quarter. In the second quarter, we achieved a 21.2% year-over-year increase on the top line for total of US$217.3 million. China revenues lead growth and grew 25.3% year-over-year. This was driven by our regular sales or non-tender sales, which represented almost all of China sales this quarter. The trend towards recovery continued resulting from the successful implementation of our sales re-enforcement program carried out during the last few quarters, as well as favorable government spending trend on country level hospitals.

International revenues were strong at US$126.6 million with 18.5% year-over-year growth. This represents 58.2% of worldwide sales. Our good performance continues to reflect the success of our increased investments in the international delivery channel. In this quarter, emerging markets remained our key drivers of growth was more than 20% year-over-year growth despite the Middle East and African crisis. Developed markets also contributed nicely with double-digit sales growth.

Our gross margin remains healthy. Non-GAAP gross margin was 57.6% as compared to 59% in the second quarter of 2010 and 55.9% in the first quarter of this year. This improvement from last quarter is a result of cost reduction and optimized product mix. Same as last quarter, gross margin lowered than last year due to this new city construction tax, the education surcharge and R&D appreciation. R&D continued to be our focus for the past quarter.

We introduced one major new product this quarter, the BC 68,000, a high level auto hematology analyzer as well as several exclusive reagents. This is one of the most advanced IVD products Mindray offers and we are optimistic about its market potential as well as wage and sales we’ll potentially bring. Wage and sales continue to accelerate this quarter to 28.4% of our IVD sales. We expect wage and sales to become larger product of the IVD sales in the coming quarters.

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