Mindray Medical International Limited (MR)

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Mindray Medical International Ltd. (MR)

Q3 2011 Earnings Call

November 8, 2011 8:00 AM ET

Executives

Cathy Gao – Deputy Manager, IR

Alex Lung – CFO

Jie Liu – COO

David Gibson – President, North America Operations

May Li – Deputy CFO

Analysts

Jinsong Du – Credit Suisse

Shaojing Tong – Bank of America

Ingrid Yin – Oppenheimer

Jack Hu – Deutsche Bank

Bin Li – Morgan Stanley

Sean Wu – JP Morgan

Du Wei – Goldman Sachs

Richard Yeh – Citigroup

Katherine Lu – Cowen & Company

Jessica Li – China International Capital Corporation Limited

Dave Turkaly – SIG

Anthony Petrone – Jeffries Group

Ding Ding – UBS

Presentation

Operator

Good morning everyone. Thank you for standing by and welcome to Mindray’s Third Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. 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 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

Thanks operator. Hi, everyone, and welcome to Mindray’s 2011 third 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. Alex Lung, our Chief Financial Officer; Mr. Jie Liu, our Chief Operating Officer; Mr. David Gibson, our President of North America Operations; and Ms. May Li, our Deputy Chief Financial Officer.

Our management team will review third quarter highlights, as well as speak to the current financial and 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 U.S. Private Securities Litigation Reform Act of 1995. Statements made and views expressed here today that are not historical facts are 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 CFO, Mr. Alex Lung.

Alex Lung

Thank you, Cathy. Good morning and good evening ladies and gentlemen. Thank you for joining us today for our 2011 third 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 America. Mr. David Gibson will then discuss our North American operations and Ms. May Li will discuss other company updates. Before opening the call to questions, I will discuss our 2011 outlook.

Despite a volatile global environment during the third quarter, we are pleased to report another good quarter, with close to 30% year-over-year increase on the top line of a total of $218.4 million. China revenues led growth and grew significantly by 35.4% year-over-year. This was primarily driven by our regular sales or non-tender sales, which represented over 90% of China sales this quarter.

We are happy to see the strong sales growth trajectory in the domestic market, thanks to the continued positive impact of our sales re-enforcement program as well as favorable hospital and government spending trends at county level hospitals.

International revenues were strong at $124.9 million with 25.9% year-over-year growth. This represents 57.2% of worldwide sales. Our good performance continued to reflect the success of our increased investments in the international delivery channels. In this quarter, emerging markets remained our key drivers for growth with more than 30% year-over-year growth. Eastern Europe, the CIS region and Asia-Pacific continued to deliver more than 30% year-over-year growth. The Middle East and Africa exceeded our expectations and grew over 40% during the period, thanks to big government orders in Turkey and our continuous sales efforts in public sector in major African markets. Developed markets also contributed nicely with double-digit sales growth increase, both in North America and Western Europe.

Non-GAAP gross margin was 55.5% as compared to 59.5% in the third quarter of 2010 and 57.6% in the second quarter of this year. The decline compared to the last quarter was mainly due to higher portion of tender sales which carried lower gross margins. Compared to last year the gross margin comparison was also unfavorably impacted by recurring factors including taxation and FX.

R&D continues to be our focus. In the past quarter, we introduced six products, the iMEC Series patient monitors, the new iPM patient monitors and the DP10, DP20 and DP30 black and white Ultrasound Systems and A3 Anesthesia System.

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