SHENZHEN, China, Aug. 11, 2014 /PRNewswire/ -- 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 ended June 30, 2014.
Highlights for Second Quarter 2014
- Net revenues increased 8.9% year-over-year to $334.5 million. International sales were $182.0 million, representing 54.4% of the company’s total net revenues. China sales totaled $152.5 million.
- Reagent sales contributed 41.2% to the IVD segment, up from 36.6% in the same period last year and from 38.1% in the previous quarter.
- In addition to the reagents, the biochemistry analyzers BS-800 and BS-2000 performed well in China.
“In the second quarter, the Chinese healthcare market remained sluggish for our business while unfavorable foreign exchange and political issues affected our sales in some key emerging markets,” commented Mr. Li Xiting, Mindray’s President and Co-Chief Executive Officer. “However, we are encouraged by our reagent sales performance and the growth momentum achieved by our high-speed biochemistry analyzers and high-end ultrasound products. This is the result of our focus on innovation, which allows us to consistently introduce new products into different markets.”
SUMMARY -- Second quarter 2014
(in $ millions, except per-share data) | Three Months Ended | ||
June 30 | |||
2014 | 2013 | % chg | |
Net Revenues | 334.5 | 307.2 | 8.9% |
Net Revenues Generated in China | 152.5 | 147.4 | 3.4% |
Net Revenues Generated in International Markets | 182.0 | 159.7 | 13.9% |
Gross Profit | 189.2 | 176.5 | 7.2% |
Non-GAAP Gross Profit | 191.4 | 178.7 | 7.1% |
Operating Income | 64.4 | 66.7 | -3.4% |
Non-GAAP Operating Income | 71.6 | 73.1 | -2.0% |
EBITDA | 77.0 | 78.9 | -2.4% |
Net Income[1] | 59.6 | 62.1 | -3.9% |
Non-GAAP Net Income[1] | 66.2 | 68.2 | -3.0% |
Non-GAAP Net Income (ex tax benefit) [2] | 64.3 | 68.2 | -5.8% |
Diluted EPS | 0.50 | 0.51 | -1.8% |
Non-GAAP Diluted EPS | 0.56 | 0.56 | -0.8% |
Non-GAAP Diluted EPS (ex tax benefit) | 0.54 | 0.56 | -3.7% |
[1] |
For this press release, net income and non-GAAP net income refers to GAAP net income attributable to the Company and Non-GAAP net income attributable to the Company as stated in exhibit below, respectively. |
[2] | The non-GAAP net income (ex tax benefit) excludes the tax benefits of $1.9 million recognized in the second quarter of 2014, in relation to the nationwide key software enterprise status. |
Net Revenues
Mindray reported net revenues of $334.5 million for the second quarter of 2014, an 8.9% increase from the second quarter of 2013.
- Net revenues generated in China increased 3.4% year-over-year to $152.5 million.
- Net revenues generated in the international markets increased 13.9% year-over-year to $182.0 million.
Performance by Segment
Patient Monitoring & Life Support Products: Net revenues in this segment increased 1.8% from the second quarter of 2013 to $119.3 million, contributing 35.7% to total net revenues in the second quarter of 2014.
In-Vitro Diagnostic Products: Net revenues in this segment increased 11.3% year-over-year to $98.3 million, contributing 29.4% to total net revenues in the second quarter of 2014. Reagents sales represented 41.2% of this segment’s net revenues.
Medical Imaging Systems: Net revenues in this segment increased 11.2% from a year ago to $84.6 million, contributing 25.3% to total net revenues in the second quarter of 2014.
Others: Net revenues increased 26.3% from the second quarter of 2013 to $32.2 million, contributing 9.6% to total net revenues in the second quarter of 2014. Other net revenues mainly include sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period.
Gross Margin
Second quarter 2014 gross profit was $189.2 million, a 7.2% increase from the second quarter of 2013. Second quarter 2014 non-GAAP gross profit was $191.4 million, a 7.1% increase from the second quarter of 2013. Second quarter 2014 gross margin was 56.6% compared to 57.5% in the second quarter of 2013 and 55.1% in the first quarter of 2014. Second quarter 2014 non-GAAP gross margin was 57.2% compared to 58.2% in the second quarter of 2013 and 55.9% in the first quarter of 2014.
Operating Expenses
Selling expenses in the second quarter of 2014 were $63.5 million, or 19.0% of total net revenues, compared to 17.8% in the second quarter of 2013 and 20.7% in the first quarter of 2014. Non-GAAP selling expenses were $60.6 million, or 18.1% of total net revenues, compared to 17.0% in the second quarter of 2013 and 19.7% in the first quarter of 2014.
General and administrative expenses for the second quarter of 2014 were $27.6 million, or 8.2% of total net revenues, compared to 8.7% in the second quarter of 2013 and 11.3% in the first quarter of 2014. Non-GAAP general and administrative expenses for the second quarter of 2014 were $26.8 million, or 8.0% of total net revenues, compared to 8.5% in the second quarter of 2013 and 9.3% in the first quarter of 2014.
Research and development expenses for the second quarter of 2014 were $33.7 million, or 10.1% of total net revenues, compared to 9.3% in the second quarter of 2013 and 11.4% in the first quarter of 2014. Non-GAAP research and development expenses for the second quarter of 2014 were $32.3 million, or 9.7% of total net revenues, compared to 8.9% in the second quarter of 2013 and 11.0% in the first quarter of 2014.
Total share-based compensation expenses, which were allocated to cost of revenues and related operating expenses, were $3.8 million in the second quarter of 2014 compared to $3.2 million in the second quarter of 2013 and $7.6 million in the first quarter of 2014.
Operating income was $64.4 million in the second quarter of 2014, a 3.4% decrease from a year ago. Non-GAAP operating income in the second quarter of 2014 was $71.6 million, a 2.0% decrease from the second quarter of 2013. Operating margin was 19.3% in the second quarter of 2014 compared to 21.7% in the second quarter of 2013 and 11.8% in the first quarter of 2014. Non-GAAP operating margin was 21.4% in the second quarter of 2014 compared to 23.8% in the second quarter of 2013 and 16.0% in the first quarter of 2014.
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)
Second quarter 2014 EBITDA decreased 2.4% year-over-year to $77.0 million.
Net Income
Net income decreased 3.9% year-over-year to $59.6 million in the second quarter of 2014. Non-GAAP net income decreased 3.0% year-over-year to $66.2 million in the second quarter of 2014. Net margin was 17.8% in the second quarter of 2014 compared to 20.2% in the second quarter of 2013 and 13.5% in the first quarter of 2014. Non-GAAP net margin was 19.8% in the second quarter of 2014, compared to 22.2% in the second quarter of 2013 and 17.4% in the first quarter of 2014. Excluding the tax benefits related to the nationwide key software enterprise status, second quarter 2014 non-GAAP net income decreased 5.8% year-over-year to $64.3 million and non-GAAP net margin was 19.2%, compared to 22.2% in the second quarter of 2013 and 16.9% in the first quarter of 2014. Second quarter 2014 income tax expense was $9.4 million, representing an effective tax rate of 13.4%.
Second quarter 2014 basic and diluted earnings per share were $0.51 and $0.50 respectively, compared to $0.52 and $0.51 in the second quarter of 2013. Basic and diluted non-GAAP earnings per share were $0.57 and $0.56 respectively, compared to $0.58 and $0.56 in the second quarter of 2013. Excluding the tax benefits, diluted non-GAAP earnings per share was $0.54 in the second quarter of 2014. Shares used in the computation of diluted earnings per share for the second quarter of 2014 were 118.1 million.
Other Select Data
Accounts receivable turnover days were 52 days in the second quarter of 2014, same as a year ago and lower than 69 days in the first quarter of 2014. Inventory turnover days were 99 days in the second quarter of 2014, compared to 88 days in the second quarter of 2013 and 114 days in the first quarter of 2014. Accounts payable turnover days were 62 days in the second quarter of 2014, compared to 54 days in the second quarter of 2013 and 78 days in the first quarter of 2014. Mindray calculates the above working capital turnover days using the average of the beginning and ending net balances of the quarter.
As of June 30, 2014, the company had $915.6 million in cash and cash equivalents as well as short-term investments, compared to $1.0 billion as of March 31, 2014. Net cash provided by operating activities and net cash outflow for capital expenditures during the second quarter of 2014 were $84.6 million and $23.2 million respectively.
As of June 30, 2014, the company had around 8,200 employees.
Board of Directors Change
Separately, the company announced that Mr. Chen Qingtai has resigned for personal reasons as an independent director of Mindray’s Board of Directors and a member of Audit Committee, with effect from July 31, 2014. Mr. Chen has confirmed that his resignation was not the result of any disagreement with the company on any matter relating to its operations, policies or practices.
Business Outlook for Full Year 2014
The company now expects its full year 2014 net revenues to grow at least 10% over its full year 2013 net revenues. The company now also anticipates its full year 2014 non-GAAP net income to decrease by a mid-single-digit percentage over its full year 2013 non-GAAP net income. This guidance excludes the tax benefits related to the nationwide key software enterprise status and assumes a corporate income tax rate of 15% applicable to the Shenzhen subsidiary.
The company expects its capital expenditure for full year 2014 to be around $130 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.
“In light of the weakness in China and some key emerging markets in the first half of the year, we are revising our financial guidance for 2014. Nevertheless, we believe the long-term fundamentals of these healthcare markets remain solid,” commented Mr. Cheng Minghe, Mindray’s Co-Chief Executive Officer and Chief Strategic Officer. “To achieve sustainable growth for our company in the long run, we will continue to strengthen our sales, marketing, distribution and product development capabilities as well as evaluate M&A and other collaboration opportunities.”
Conference Call Information
Mindray’s management will hold an earnings conference call at 8:00 AM on August 12, 2014 U.S. Eastern Time (8:00 PM on August 12, 2014 Beijing/Hong Kong Time).
Dial-in details for the earnings conference call are as follows:
International Toll Free: | |
United States: | +1-866-519-4004 |
United Kingdom: | 080-8234-6646 |
Hong Kong: | 800-930-346 |
China Landline: | 800-819-0121 |
Local dial-in numbers: | |
United States: | +1-845-675-0437 |
United Kingdom: | +44-20-3059-8139 |
Hong Kong: | +852-2475-0994 |
China Mobile: | 400-620-8038 |
Passcode for all regions: | Mindray |
A replay of the conference call may be accessed by phone at the following numbers until August 26, 2014.
U.S. Toll Free: | +1-855-452-5696 |
International: | +1-646-254-3697 |
Passcode: | 74522016 |
Additionally, a live and archived webcast of this conference call will be available on the Investor Relations section of Mindray’s website at: http://ir.mindray.com/.
Use of Non-GAAP Financial Measures
Mindray provides gross profit, selling expenses, general and administrative expenses, research and development expenses, operating income, net income and earnings per share on a non-GAAP basis that excludes share-based compensation expense and acquired intangible assets amortization expense, all net of related tax impact, as well as EBITDA to enable investors to better assess the company’s operating performance for the second quarter of 2014. The non-GAAP measures described by the company are reconciled to the corresponding GAAP measure in the exhibit below titled “Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures”.
The company has reported for the second quarter of 2014 on a non-GAAP basis. Each of the terms as used by the company is defined as follows:
- Non-GAAP gross profit represents gross profit reported in accordance with GAAP, adjusted for the effects of share-based compensation and amortization of acquired intangible assets.
- Non-GAAP operating income represents operating income reported in accordance with GAAP, adjusted for the effects of share-based compensation, and amortization of acquired intangible assets.
- Non-GAAP selling expenses represent selling expenses reported in accordance with GAAP, adjusted for the effects of share-based compensation, and amortization of acquired intangible assets.
- Non-GAAP general and administrative expenses represent general and administrative expenses reported in accordance with GAAP, adjusted for the effects of share-based compensation.
- Non-GAAP research and development expenses represent research and development expenses reported in accordance with GAAP, adjusted for the effects of share-based compensation.
- Non-GAAP net income represents net income reported in accordance with GAAP, adjusted for the effects of share-based compensation and amortization of acquired intangible assets, all net of related tax impact.
- Non-GAAP earnings per share represents non-GAAP net income divided by the number of shares used in computing basic and diluted earnings per share in accordance with GAAP, and excludes the impact of the declared dividends for the basic calculation.
- EBITDA represents net income reported in accordance with GAAP, adjusted for the effect of interest income and expenses, income tax provision/benefits, depreciation and amortization.
The company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The company notes that these measures may not be calculated on the same basis of similar measures used by other companies. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results for the three and six months ended June 30, 2013 and 2014, respectively, in the attached financial information.
Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including, without limitation, statements about Mindray’s anticipated net revenues, non-GAAP net income and capital expenditure for 2014, our assumption of a corporate income tax rate of 15% applicable to the Shenzhen subsidiary, our belief that the long-term fundamentals of China and some key emerging markets remain solid, statement that to achieve sustainable growth for our company in the long run we will continue to strengthen our sales, marketing and distribution and product development capabilities as well as evaluate M&A and other collaboration opportunities and other statements under “Business Outlook for full year 2014" are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors, including, without limitation, the growth and expected growth of the medical device market in China and internationally; applicable government policies and regulations; our ability to satisfy the requirements imposed by relevant regulatory bodies; market acceptance of our products; our expectations regarding demand for our products; our ability to expand our production, our sales and distribution network and other aspects of our operations; our ability to stay abreast of market trends and technological advances; our ability to effectively protect our intellectual property rights and not infringe on the intellectual property rights of others; our ability to settle disputes with our customers and suppliers; competition in the medical device industry in China and internationally; and general economic and business conditions in the countries in which we operate. For a discussion of other important factors that could adversely affect our business, financial condition, results of operations and prospects, see “Risk Factors” beginning on page 5 of our annual report on Form 20-F, which was filed, with the Securities and Exchange Commission on April 28, 2014. Our results of operations for the second quarter as of June 30, 2014 are not necessarily indicative of our operating results for any future periods. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in our public filings with the Securities and Exchange Commission. Any projections in this release are based on limited information currently available to us, which is subject to change. Although such projections and the factors influencing them will likely change, we will not necessarily update the information. Such information speaks only as of the date of this release.
All references to “shares” are to our ordinary shares, which are divided into two classes, Class A and Class B. Each of our American Depositary Shares, which trade on the New York Stock Exchange, represents one Class A ordinary share.
About Mindray
We are a leading developer, manufacturer and marketer of medical devices worldwide.
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