Mindray Medical International Limited (MR)

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Mindray Medical International (MR)

Q3 2012 Earnings Call

November 6, 2012 08:00 AM ET


Cathy Gao - IR

Jie Liu - COO

David Gibson - President of North America Operations

Alex Lung - CFO


Richard Yeh - Citigroup

Bin Li - Morgan Stanley

Jinsong Du with Credit Suisse

Jessica Le - CICC

Ingrid Yin - Oppenheimer

Jack Hu - Deutsche Bank



Good morning, everyone. Thank you for standing by and welcome to Mindray's Third Quarter 2012 Earnings Conference Call. (Operator Instructions).

I would now like to turn the call over to your host for today's conference Ms. Cathy Gao, Mindray's Manager of Investor Relations. Please proceed, Ms. Gao.

Cathy Gao

Thanks operator. Hi, everyone Welcome to Mindray's 2012 Third Quarter Earnings Conference Call. We released our financial results last night and they are now available on the Company's website and Newswire services. There will also be an archived webcast of this conference call on our Investor Relations website.

Joining today's call are Mr. Li Xiting, our President and the CEO; Mr. Xu Hang, our Chairman, Mr. Jie Liu, our Chief Operating Officer, Mr. Alex Lung, our Chief Financial Officer; Mr. Minghe Cheng, our Chief Strategic Officer; Mr. David Gibson, our President of North America Operations; and Ms. May Li, our Deputy Chief Financial Officer.

In a moment, Mr. Jie Liu will provide an update of the Company's operational performance. Mr. David Gibson will discuss Mindray's operations in the North America region. Mr. Alex Lung will then review the detailed financial results and discuss recent Company's update as well as the Company’s outlook for 2012. After that they will be happy to take 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 the views expressed here which 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 and the 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 5 of our Annual Report on Form 20-F filed with the SEC on April 30, 2012. Any projections made here today are based only on limited information currently available to us, and are subject to change. Mindray does not undertake any obligations to update any forward-looking statements, except as required under applicable law.

I will now turn the call over to Mindray's COO, Mr. Jie Liu.

Jie Liu

Thank you Cathy. Good morning and good evening ladies and gentlemen. Our team continues to work hard in third quarter and we have achieved good overall performance. We reported to our revenue of $257.1 million represent a year-over-year growth of 17.7%, our non-GAAP gross margin was 56.5% which was 100 basis points better than the same period last year. We also delivered solid non-GAAP net income gross of 18.1% to $50.1 million. Net operating cash flow was again very strong at a $59.3 million.

Almost doubling that of third quarter last year. China continues to be our key growth driver and the sales remained robust recording 25.9% year-over-year growth. Total international sales rose 11.6% over the same period last year and the emerging markets was primary contributor with a sales growth of 20.5% year-over-year. We recorded a weaker sales performance in developing markets where we register slight decline for 1.4% for this quarter mainly because of weaker than expected overall marketing condition in North America.

David will give more details about North American region later on. To clarify we define developing markets as North America and Western European countries. While our emerging markets are everywhere else except China and the developed markets. Sales continue to rise for our IVD segment. The reagent the business was particularly strong contributing 37.4% to overall IVD sales in this quarter up from 31% in same period last year and 34.4% in the previous quarter.

This is mainly because our equipment in the reagent (inaudible) business model and he is working well and the two recently introduced two new products, BC-800 and the BC-6800 helped to ramp up sales. The IVD segment achieved more than 30.3% year-over-year growth in this quarter. Over the last few quarters we have continued to expand our product offering and to integrate other IVD business we have acquired.

For these reason we are very optimist about the future growth prospects of our reagents and overall IVD segment. In this quarter we introduced two new product the medical imaging line color ultrasound system DC-3 and a competitive economic and digital radiography product DigiEye380. So far this year we have already launched seven new products and have made our full year target of seven to 10 new product launches. In terms of M&A we made two small acquisition in China recently. The first one is Shanghai Medical Optical Instruments Factory Corporation which manufactures and sales flexible in this coast and the relating such devices. This deal compliments our prior acquisition of Hangzhou Optical Medical Instrument Corporation which folks are rigid in this coast.

We expect these two transaction to help expand our reach into the minimally invasive surgery devices and the related surgery consumable market which will supplement minor existing to the operation solution. We all support our continuous stake in (inaudible) instrument which makes coagulation analyzers and related to product for (inaudible) and the cardiovascular disease detection. The company’s thrombotic and hemostatic products will complement Mindray's existing IVD products. This deal help us come up with even more complete solution for our customers and to support our strategy of penetrating into attractive consumer overall product market.

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