Mindray Medical International Ltd. (MR) posted second-quarter results prior to the opening bell today. GAAP net income recorded a strong growth of 37.2% year over year to $33.0 million. Excluding amortization of intangibles and certain other items, earnings per share came in at 31 cents, topping the Zacks Consensus Estimate by nearly 7%, or 2 cents.
The China-based company reported a growth of nearly 10% year over year to $160.1 million. The expansion was driven by Chinese operations, which grew 31.3% to $75.9 million helped by the launch of new products and stimulus funding by the government. The growth was partially offset by a 4.2% decline in international operations to $84.1 million, as performance was hurt by sluggish hospital spending in the U.S.
Mindray is a leading developer, manufacturer and marketer of medical devices based in China. The company offers more than 40 products across three segments including patient monitoring devices and life support products, in-vitro diagnostic instruments and medical imaging systems.
Sales from Patient Monitoring & Life Support — the flagship segment, contributing 43.2% to overall revenues — rose 2.1% year over year to $69.1 million. In-Vitro Diagnostic products posted a growth of 12.8% year over year to $40.0 million, while Medical Imaging Systems grew 16.5% to $41.9 million.
Gross profit swelled 18.9% year over year to $91.6 million, while gross margin increased by 440 basis points (bps) to 57.2%. The growth in margin was driven by recently launched products such as HyLite 6700/6500 and HyBase 6100 patient monitoring systems, Accutorr V vital signs monitor, NetGuard clinical alert system and DP-6900 portable ultrasound system. The company’s margin also benefits from software value-added tax rebates for the sale of embedded software pursuant to certain government policies in China.
Total operating expenses as a percentage of revenues declined 90 bps year over year to 32.8%, primarily due to the company’s cost-cutting efforts. Accordingly, operating income expanded 40.2% year over year to $39.0 million, while operating margin climbed 530 bps to 24.4%.
Cash and equivalents at the end of the quarter was $284.5 million, compared to $261.2 million as in the previous quarter. The company generated $34.5 million of cash from operating activities and deployed $12.6 million towards capital expenditures during the quarter. Mindray also stated that average inventory days improved to 82 days in the second quarter, compared to 88 days in the first quarter. DSOs (Days Sales Outstanding) also reduced to 54 days from 60 days over the same period.
Looking ahead, management expects robust growth in Chinese operations to continue, driven by strong government spending in the second-half. In international markets, the company anticipates mixed performance with Africa, Asia and the Middle East performing well, partially offset by sluggish hospital spending in the U.S.
Accordingly, Mindray continues to expect full-year revenues to grow by at least 10% compared to last year, which comes to about $602.3 million. The company also expects non-GAAP earnings per share to grow by 10% over last year, which comes to approximately $1.06 per share. The guidance is lower than the Zacks Consensus Estimate of $1.15 per share derived from 9 covering analysts, which has declined by 3 cents, or 2.5%, over the past 2 months.
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