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 first quarter ended March 31, 2012.
Highlights for First Quarter 2012
- Net revenues were $219.0 million, an increase of 21.1% over the first quarter of 2011.
- Robust China sales of $91.8 million, up 26.8% year-over-year, primarily due to our strong performance in the mid-end market segment.
- Strong international sales of $127.2 million, a year-over-year increase of 17.3%. Emerging markets remain the key revenue driver with 23.2% sales growth.
- Non-GAAP net income increased 16.5% over the first quarter of 2011, excluding tax benefits.
- EBITDA in the first quarter of 2012 was $46.7 million, a year-over-year increase of 14.3%.
- Net operating cash generated during the quarter was $60.1 million, up 86.1% from the same period a year before.
- In May, Mindray announced an agreement to acquire a controlling stake of Hangzhou Optcla Medical Instrument Co. Ltd., which specializes in designing, developing, manufacturing and distributing different types of rigid endoscopes and surgical instruments and consumables in China.
"We are off to a good start in the first quarter of 2012 and this will support us to execute our plans for the remainder of the year. Overall, we achieved solid growth in revenue, non-GAAP net income excluding tax benefits, as well as operating cash flow," commented Xu Hang, Mindray's chairman and co-chief executive officer. "The 21.1% year-over-year revenue growth was driven primarily by strong China sales. This is the fourth consecutive quarter in which we recorded more than 25% growth in the domestic market, thanks to our solid execution of the sales reinforcement program, coupled with continued favorable private and government healthcare spending in areas where we have strong presence. We are also happy to see that our investments in our worldwide channels continue to pay off, with sales growth of 23.2% in emerging markets and stable market share gains in developed markets. This year, we will continue to invest in building a stronger global brand of Mindray, as well as establishing a more systematic R&D approach. On the M&A front, we continued our progress and announced an acquisition of a rigid endoscope business in China. We will continue to actively seek opportunities to further increase our market penetration worldwide."
SUMMARY – First quarter 2012
Revenues
Mindray reported net revenues of $219.0 million for the first quarter of 2012, a 21.1% increase from $180.9 million in the first quarter of 2011.
- Net revenues generated in China increased 26.8% to $91.8 million from $72.5 million in the first quarter of 2011.
- Net revenues generated in the international markets increased 17.3% to $127.2 million from $108.5 million in the first quarter of 2011.
Performance by Segment
Patient Monitoring & Life Support Products: Revenues in this segment increased 22.5% to $95.7 million from $78.1 million in the first quarter of 2011, contributing 43.7% to total net revenues in the first quarter of 2012.
In-Vitro Diagnostic Products: Revenues in this segment increased 22.4% to $56.6 million from $46.3 million in the first quarter of 2011, contributing 25.8% to total net revenues in the first quarter of 2012. Reagents sales represented 31.5% of this segment's revenues.
Medical Imaging Systems: Revenues in this segment increased 11.0% to $52.8 million from $47.6 million in the first quarter of 2011, contributing 24.1% to total net revenues in the first quarter of 2012.
Others: Other revenues increased 55.6% to $13.9 million from $8.9 million in the first quarter of 2011, contributing 6.4% to total net revenues in the first quarter of 2012. They included service revenues from extended warranty, sales of accessories and service fees charged for post-warranty period repair services.
Gross Margins
First quarter 2012 gross profit was $120.3 million, a 20.7% increase from $99.7 million in the first quarter of 2011. First quarter 2012 non-GAAP gross profit was $121.4 million, a 20.2% increase from $101.0 million in the first quarter of 2011. First quarter 2012 gross margin was 54.9% compared to 55.1% in the first quarter of 2011 and 54.2% in the fourth quarter of 2011. Non-GAAP gross margin was 55.5% in the first quarter of 2012 compared to 55.9% in the first quarter of 2011 and 54.7% in the fourth quarter of 2011.
Operating Expenses
Selling expenses for the first quarter of 2012 were $39.7 million, or 18.1% of total net revenues, compared to 18.6% in the first quarter of 2011 and 19.7% in the fourth quarter of 2011. Non-GAAP selling expenses for the first quarter of 2012 were $38.4 million, or 17.5% of total net revenues, compared to 17.7% in the first quarter of 2011 and 19.0% in the fourth quarter of 2011.
General and administrative expenses for the first quarter of 2012 were $19.6 million, or 9.0% of total net revenues, compared to 8.0% in the first quarter of 2011 and 6.7% in the fourth quarter of 2011. Non-GAAP general and administrative expenses for the first quarter of 2012 were $19.1 million, or 8.7% of the total net revenues, compared to 7.7% in the first quarter of 2011 and 6.3% in the fourth quarter of 2011.
Research and development expenses for the first quarter of 2012 were $24.3 million, or 11.1% of total net revenues, compared to 10.3% in the first quarter of 2011 and 9.7% in the fourth quarter of 2011. Non-GAAP research and development expenses for the first quarter of 2012 were $23.4 million, or 10.7% of total net revenues, compared to 9.7% in the first quarter of 2011 and 9.3% in the fourth quarter of 2011.
Total share-based compensation expenses, which were allocated to cost of revenues and related operating expenses, were $2.2 million in the first quarter of 2012 compared to $3.2 million in the fourth quarter of 2011 and $2.8 million in the first quarter of 2011.
Operating income was $36.7 million in the first quarter of 2012, an 11.1% increase from $33.0 million in the first quarter of 2011. Non-GAAP operating income in the first quarter of 2012 was $40.5 million, a 7.9% increase from $37.6 million in the first quarter of 2011. Operating margin was 16.8% in the first quarter of 2012 compared to 18.3% in the first quarter of 2011 and 18.1% in the fourth quarter of 2011. Non-GAAP operating margin was 18.5% in the first quarter of 2012 compared to 20.8% in the first quarter of 2011 and 20.1% in the fourth quarter of 2011.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
First quarter 2012 EBITDA increased 14.3% year-over-year to $46.7 million from $40.8 million in the first quarter of 2011.
Net Income
Net income decreased 3.0% year-over-year to $36.6 million from $37.7 million in the first quarter of 2011. Non-GAAP net income decreased 4.4% year-over-year to $40.4 million from $42.2 million in the first quarter of 2011. Excluding the tax benefits of $7.6 million recognized in the first quarter of 2011, non-GAAP net income increased 16.5% over the first quarter of 2011. Net margin was 16.7% in the first quarter of 2012 compared to 20.8% in the first quarter of 2011 and 17.7% in the fourth quarter of 2011. Non-GAAP net margin was 18.4% in the first quarter of 2012 compared to 23.3% in the first quarter of 2011 and 19.6% in the fourth quarter of 2011.
First quarter 2012 basic and diluted earnings per share were $0.32 and $0.31 respectively, compared to $0.33 and $0.32 in the first quarter of 2011. Basic and diluted non-GAAP earnings per share were $0.35 and $0.34 respectively, compared to $0.37 and $0.36 in the first quarter of 2011. Shares used in the computation of diluted earnings per share for the first quarter 2012 were 119.0 million.
Other Select Data
Accounts receivable days were 79 days in the first quarter of 2012 compared to 66 days in the fourth quarter of 2011. Inventory days were 92 days in the first quarter of 2012 compared to 78 days in the fourth quarter of 2011. Accounts payable days were 54 days in the first quarter of 2012 compared to 44 days in the fourth quarter of 2011. Mindray calculates the above working capital days using the average of beginning and ending balances of the quarter.
As of March 31, 2012, the company had $664.2 million in cash and cash equivalents, and short-term investments as compared to $603.5 million as of December 31, 2011. Net cash generated from operating activities and net cash outflow for capital expenditures during the quarter were $60.1 million and $16.1 million respectively.
As of March 31, 2012, the company had approximately 6,800 employees.
Business Outlook for Full Year 2012
The company maintains its full year guidance and expects its full year 2012 net revenues to grow at least 18% over its full year 2011 net revenues.
The company continues to expect its full year 2012 non-GAAP net income to grow at least 13% over its non-GAAP net income for full year 2011. This guidance excludes the tax benefits related to the National Key Software Enterprise status and assumes a corporate income tax rate of 15% applicable to the Shenzhen subsidiary. We recorded tax benefits of $7.6 million in the first quarter of 2011 as a result of receiving the National Key Software Enterprise status for year 2010. We have not received such notice from the PRC tax authority in regards to the approval for year 2011 and thus have not recorded any tax benefits in the first quarter of 2012. Upon notice, the potential benefits will be included in our financial statements but the likelihood and timing of such approval cannot be determined at this time.
The company expects its capital expenditure for 2012 to be around $90 million.
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.
"We are maintaining our guidance at this time," commented Li Xiting, Mindray's president and co-chief executive officer. "The overall growth prospects of our key markets remain positive for the rest of 2012. We expect China and emerging markets to lead growth for the organization, based on our strong competitive position and our ability to grasp opportunities arising from the favorable private and public healthcare spending environment. As we stated earlier this year, we remain cautious on Europe due to its economic uncertainty and on certain regions in the emerging markets as a result of political instability as well as other policy movements. We will continue to invest in R&D and improve our overall operational efficiency to achieve long-term sustainable growth. We remain very confident in Mindray's global position and we will continue to adapt and formulate the best strategies in the markets that we operate in."
SOURCE Mindray Medical International Limited
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