Mindray Medical International Limited (NYSE: MR), a leading developer, manufacturer and marketer of medical devices worldwide announced today its selected unaudited financial results for the second quarter and first half ended June 30, 2009.
Highlights for Second Quarter and First Half 2009 -- Second quarter 2009 net revenues were $160.1 million, an increase of 9.9% over the second quarter of 2008 and 19.3% over the first quarter of 2009. -- Fully diluted EPS in the second quarter of 2009 was $0.29, a 38.8% increase from the second quarter of 2008 and a 29.8% increase from the first quarter of 2009. -- EBITDA in the second quarter of 2009 was $46.7 million, a 38.8% increase from the second quarter of 2008. -- Gross margin in the second quarter of 2009 was 57.2%, up from 52.8% in the second quarter of 2008 and 55.7% in the first quarter of 2009. -- Net operating cash generated during the second quarter of 2009 was $34.5 million. -- Working capital days were 77 in the second quarter of 2009. -- A total of five products were launched in the first half of 2009. -- Mindray USA expanded its Group Purchase Organization ("GPO") contract base; the DPM product line has now been added to contracts in five of the largest GPOs, providing access to this product line to over 85% of the U.S. hospitals and surgery centers.
"Mindray continued to generate solid operational performance and earnings growth in the face of a global marketplace that remains very challenging," commented Xu Hang, Mindray's chairman and co-chief executive officer. "The ongoing realignment of core competencies within each region and continued integration of our Mahwah operations have and will continue to enable us to improve our cost structure and operational efficiency, while bringing new products to market and maintaining our competitive position in the marketplace."
SUMMARY - Second Quarter and First Half 2009 (in $ millions, except Three Months Ended Six Months Ended per-share data) June 30 June 30 2009 2008 % chg 2009 2008 % chg Net Revenues 160.1 145.7 9.9% 294.2 233.1 26.2% Revenues generated in China 76.0 57.9 31.3% 138.3 100.6 37.4% Revenues generated outside China 84.1 87.8 -4.2% 155.9 132.5 17.7% Gross Profit 91.6 77.0 18.9% 166.3 126.4 31.6% Non-GAAP Gross Profit 93.4 79.9 16.9% 169.7 130.1 30.4% Operating Income 39.0 27.8 40.2% 68.4 55.7 22.8% Non-GAAP Operating Income 43.9 40.0 9.8% 78.6 70.8 11.0% EBITDA 46.7 33.6 38.8% 82.3 64.9 26.7% Net Income 33.0 24.1 37.2% 58.4 49.1 18.8% Non-GAAP Net Income 37.8 35.2 7.5% 68.4 63.0 8.4% Diluted EPS 0.29 0.21 38.8% 0.52 0.43 19.9% Non-GAAP Diluted EPS 0.34 0.31 8.7% 0.61 0.56 9.4%
Revenues
Mindray reported net revenues of $160.1 million for the second quarter of 2009, a 9.9% increase from $145.7 million in the second quarter of 2008. Net revenues generated in China in the second quarter of 2009 increased 31.3% to $76.0 million from $57.9 million in the second quarter of 2008, while net revenues generated in international markets in the second quarter of 2009 decreased 4.2% to $84.1 million from $87.8 million in the second quarter of 2008.
Performance by Segment
Patient Monitoring & Life Support Products: Patient monitoring & life support products segment revenues increased 2.1% to $69.1 million from $67.6 million in the second quarter of 2008. The patient monitoring & life support products segment contributed 43.2% to the total net revenues in the second quarter of 2009.
In-Vitro Diagnostic Products: In-vitro diagnostic products segment revenues increased 12.8% to $40.0 million from $35.5 million in the second quarter of 2008. The in-vitro diagnostic products segment contributed 25.0% to the total net revenues in the second quarter of 2009.
Medical Imaging Systems: Medical imaging systems segment revenues increased 16.5% to $41.9 million from $36.0 million in the second quarter of 2008. The medical imaging systems segment contributed 26.1% to the total net revenues in the second quarter of 2009.
Others: Other revenues, which are primarily comprised of service fees charged for post warranty period repair services, increased 37.4% to $9.1 million from $6.6 million in the second quarter of 2008. Other revenues contributed 5.7% to the total net revenues in the second quarter of 2009.
The segment revenue amounts discussed above include shipping and handling fees charged to customers.
Gross Margins
Second quarter 2009 gross profit was $91.6 million, an 18.9% increase from $77.0 million in the second quarter of 2008. Second quarter 2009 non-GAAP gross profit was $93.4 million, a 16.9% increase from $79.9 million in the second quarter of 2008. Second quarter 2009 gross margin was 57.2% compared to 52.8% in the second quarter of 2008 and 55.7% in the first quarter of 2009. Non-GAAP gross margin was 58.3% in the second quarter of 2009 compared to 54.8% in the second quarter of 2008 and 56.9% in the first quarter of 2009.
Operating Expenses
Selling expenses for the second quarter of 2009 were $26.4 million, or 16.5% of the total net revenues, compared to 14.2% in the second quarter of 2008 and 16.2% in the first quarter of 2009. Non-GAAP selling expenses for the second quarter of 2009 were $24.9 million, or 15.5% of the total net revenues, compared to 13.3% in the second quarter of 2008 and 15.0% in the first quarter of 2009.
General and administrative expenses for the second quarter of 2009 were $11.4 million, or 7.1% of the total net revenues, compared to 6.6% in the second quarter of 2008 and 6.6% in the first quarter of 2009. Non-GAAP general and administrative expenses for the second quarter of 2009 were $10.7 million, or 6.7% of the total net revenues, compared to 6.1% in the second quarter of 2008 and 5.7% in the first quarter of 2009.
Research and development expenses for the second quarter of 2009 were $14.7 million, or 9.2% of the total net revenues, compared to 8.5% in the second quarter of 2008 and 11.0% in the first quarter of 2009. Non-GAAP research and development expenses for the second quarter of 2009 were $13.9 million, or 8.7% of the total net revenues, compared to 7.9% in the second quarter of 2008 and 10.4% in the first quarter of 2009.
Total share-based compensation expenses, which were allocated to cost of revenues and related operating expenses, were $2.6 million in the second quarter of 2009 compared to $3.0 million in the first quarter of 2009 and $2.4 million in the second quarter of 2008.
Operating income was $39.0 million in the second quarter of 2009, a 40.2% increase from $27.8 million in the second quarter of 2008. Non-GAAP operating income in the second quarter of 2009 was $43.9 million, a 9.8% increase from $40.0 million in the second quarter of 2008. Operating margin was 24.4% in the second quarter of 2009 compared to 19.1% in the second quarter of 2008 and 21.9% in the first quarter of 2009. Non-GAAP operating margin was 27.4% in the second quarter of 2009 compared to 27.5% in the second quarter of 2008 and 25.9% in the first quarter of 2009.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Second quarter 2009 EBITDA increased 38.8% year-over-year to $46.7 million from $33.6 million in the second quarter of 2008 and increased 31.2% from $35.6 million in the first quarter of 2009.
Net Income
Net income increased 37.2% year-over-year to $33.0 million from $24.1 million in the second quarter of 2008. Non-GAAP net income increased 7.5% year-over-year to $37.8 million from $35.2 million in the second quarter of 2008. Net margin was 20.6% in the second quarter of 2009 compared to 16.5% in the second quarter of 2008 and 18.9% in the first quarter of 2009. Non-GAAP net margin was 23.6% in the second quarter of 2009 compared to 24.2% in the second quarter of 2008 and 22.7% in the first quarter of 2009. Second quarter 2009 income tax expense was $6.3 million representing an effective tax rate of 16.1%.
Second quarter 2009 basic and diluted earnings per share were $0.30 and $0.29, respectively, compared to $0.22 and $0.21 in the second quarter of 2008. Basic and diluted non-GAAP earnings per share were $0.35 and $0.34, respectively, compared to $0.33 and $0.31 in the second quarter of 2008. Shares used in the computation of diluted earnings per share for the second quarter 2009 were 112.6 million.
Other Select Data
Average accounts receivable days outstanding were 54 days in the second quarter of 2009 compared to 60 days in the first quarter of 2009. Average inventory days were 82 days in the second quarter of 2009 compared to 88 days in the first quarter of 2009. Average accounts payable days outstanding were 59 days in the second quarter of 2009 compared to 58 days in the first quarter of 2009. Mindray calculates the above working capital days using the average of beginning and ending balances of the quarter. Historically, the company used the average of beginning of the year and ending of the quarter balances. Mindray believes this new method provides more useful information on underlying operations.
As of June 30, 2009, the company had $284.5 million in cash and cash equivalents and restricted cash, compared to $261.2 million as of March 31, 2009. Net cash generated from operating activities and net cash outflow from capital expenditures during the quarter were $34.5 million and $12.6 million, respectively.
As of June 30, 2009, the company had 5,660 employees.
First Half 2009 Results
Mindray reported net revenues of $294.2 million in the first half of 2009, representing a 26.2% increase from $233.1 million in the first half of 2008.
-- Net revenues generated in China in the first half of 2009 increased 37.4% to $138.3 million from $100.6 million in the first half of 2008. -- Net revenues generated in international markets in the first half of 2009 increased 17.7% to $155.9 million from $132.5 million in the first half of 2008.
First half 2009 EBITDA increased 26.7% year-over-year to $82.3 million from $64.9 million in the first half of 2008 and increased 2.9% from $79.9 million in the second half of 2008.
First half 2009 net income increased 18.8% year-over-year to $58.4 million from $49.1 million in the first half of 2008. First half 2009 non-GAAP net income increased 8.4% year-over-year to $68.4 million from $63.0 million in the first half of 2008.
First half 2009 diluted earnings per share increased 19.9% year-over-year to $0.52 from $0.43 in the first half of 2008. First half 2009 non-GAAP diluted earnings per share increased 9.4% to $0.61 from $0.56 in the first half of 2008.
Business Outlook for Full Year 2009
Mindray maintains its current outlook for the full year 2009, which includes:
-- 2009 net revenue to grow at a rate of at least 10% year-over-year. -- Non-GAAP EPS to grow 10% over 2008. -- Capital expenditure in the range of $50 million to $60 million. -- Share based compensation to be $12 million, based on issuances to date, which does not take into account any additional share grant that may come later this year, if any. -- Amortization of intangible assets to be $10 million including April 2006 acquisition of minority interest and May 2008 acquisition of Datascope patient monitoring business.
The company's practice is to provide guidance on a full year basis only. This forecast reflects Mindray's current and preliminary views, which are subject to change.
"Based on what we continue to see from a world economy and hospital spending perspective, we are maintaining our guidance for the year," commented Mr. Li Xiting, Mindray's president and co-chief executive officer. "We experienced excellent growth in China through the first half of the year and expect that to continue, as we look forward to the government continuing with its strong spending in the second half of 2009. China still represents our best growth prospect this year. International growth is mixed, with Africa, Asia and the Middle East performing well; distributor funding and hospital spending issues, however, continue to affect our other regions. Not surprisingly, the U.S. hospital market remains difficult to predict, as capital spending remains constrained and healthcare reform has yet to be established. That said, we remain firm in our belief that Mindray's unique vertically integrated business model, excellent financial position and focus on core competencies within each region, provide us with key advantages in these fast-changing markets."
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