Highlights for Fourth Quarter and Full Year 2008
Full year 2008 revenue generated in China and international markets up 61.1% and 110.4%, respectively, over 2007 to a total of $547.5 million
Full year 2008 non-GAAP net income, as defined below, up 49.7% year-over-year to $132.7 million
Full year 2008 non-GAAP diluted EPS, as defined below, up 48.8% year-over-year to $1.17
Strong fourth quarter operating cash flow of $40.0 million
Company further improved product mix and achieved new product development goals for 2008 with ten products brought to market across all 3 product segments
Enhanced presence in US market and received FDA 510(k) clearance for nine products
“Mindray has continued to deliver strong results despite a challenging economic environment in the fourth quarter 2008,” commented Xu Hang, Mindray’s chairman and co-chief executive officer. “In 2008, we successfully completed and delivered initial synergy targets from the acquisition of Datascope’s patient monitoring business which greatly expanded our geographic footprint in North America and strengthened our presence in Europe. Fully leveraging the strength of our internal R&D and sales and marketing capabilities, we launched ten new products during the year. Our continued focus on operating performance enabled us to create both cost and product development synergies from DPM, while simultaneously improving our operating margins and operating cash flow of the overall business.”
Revenues
Mindray reported net revenues of $167.9 million for the fourth quarter 2008, up 84.2% from $91.1 million for the fourth quarter 2007.
Net revenues generated in international markets in the fourth quarter 2008, up 103.9% to $95.2 million from $46.7 million for the fourth quarter 2007, while net revenues generated in China in the fourth quarter 2008 up 63.6% to $72.7 million from $44.4 million for the fourth quarter 2007.
Performance by Segment
Patient Monitoring & Life Support Products: Patient monitoring & life support products segment revenues up 151.1% to $77.9 million from $31.0 million for the fourth quarter 2007. The patient monitoring & life support products segment contributed 46.8% to the total net segment revenues in the fourth quarter 2008.
In-Vitro Diagnostic Products: In-vitro diagnostic products segment revenues up 34.3% to $36.4 million from $27.1 million in the fourth quarter 2007. The in-vitro diagnostic products segment contributed 21.9% to the total net segment revenues in the fourth quarter 2008.
Medical Imaging Systems: Medical imaging systems segment revenues up 40.8% to $42.6 million from $30.3 million in the fourth quarter 2007. The medical imaging systems segment contributed 25.6% to the total net segment revenues in the fourth quarter 2008.
Others: The other revenues which are primarily comprised of extended warranty services revenues and revenues derived from the third party R&D projects up 564.9% to $9.4 million from $1.4 million in the fourth quarter 2007. The other revenues contributed 5.7% to the total net segment revenues in the fourth quarter 2008.
The segment revenue amounts discussed above exclude the shipping and handling fees charged to customers.
Gross Margins
Fourth quarter 2008 gross profit was $91.1 million, up 88.6% from $48.3 million in the fourth quarter 2007. The consolidated gross margin for the fourth quarter 2008 was 54.3% against 53.0% in the fourth quarter 2007 and 54.2% in the third quarter 2008. Non-GAAP gross margin was 55.3% in the fourth quarter 2008 against 53.9% in the fourth quarter 2007 and 57.0% in the third quarter 2008.
Operating Expenses
Non-GAAP selling expenses for the fourth quarter 2008 were $26.0 million, or 15.5% of the total net revenues, against 13.8% in the fourth quarter 2007 and 14.4% in the third quarter 2008. GAAP selling expenses for the fourth quarter 2008 were $27.0 million.
Non-GAAP general and administrative expenses for the fourth quarter 2008 were $14.3 million, or 8.5% of the total net revenues, against 3.2% in the fourth quarter 2007 and 8.1% in the third quarter 2008. GAAP general and administrative expenses for the fourth quarter 2008 were $15.9 million.
Non-GAAP research and development expenses for the fourth quarter 2008 were $16.2 million, or 9.6% of the total net revenues against 9.1% in the fourth quarter 2007 and 9.4% in the third quarter 2008. GAAP research and development expenses for the fourth quarter 2008 were $16.6 million.
Total share-based compensation expenses, which were allocated to cost of goods sold and related operating expenses, were $1.6 million in the fourth quarter 2008 against $2.4 million in the fourth quarter 2007 and $2.6 million in the third quarter 2008.
Net Income
Fourth quarter 2008 non-GAAP net income up 43.0% , year-over-year to $36.0 million from $25.2 million in the fourth quarter 2007. Fourth quarter 2008 GAAP net income was $31.6 million against $21.5 million in the fourth quarter 2007. Non-GAAP net margin was 21.4% in the fourth quarter 2008 against 27.6% in the fourth quarter 2007 and 23.0% in the third quarter 2008. GAAP net margin was 18.8% in the fourth quarter 2008 against 23.6% in the fourth quarter 2007 and 19.1% in the third quarter 2008.
Fourth quarter 2008 basic and diluted non-GAAP earnings per share were $0.33 and $0.32, respectively. Fourth quarter 2008 GAAP basic and diluted earnings per share for the quarter were $0.29 and $0.28, respectively.
Net revenues generated in international markets in the full year 2008 up 110.4% to $313.1 million from $148.8 million in 2007, while net revenues generated in China in the full year 2008 up 61.1% to $234.5 million from $145.5 million in 2007.
Net Income
Full year 2008 GAAP net income was $108.7 million against $78.0 million in 2007. Non-GAAP net margin was 24.2% in the full year 2008 against 30.1% in 2007.
Full year 2008 basic and diluted non-GAAP earnings per share were $1.24 and $1.17, respectively. Full year 2008 GAAP basic and diluted earnings per share were $1.01 and $0.96, respectively.
As of December 31, 2008, the company had $252.9 million in cash and cash equivalents, restricted cash, and short-term investments.
As of December 31, 2008 the company had about 5,580 employees against 3,705 employees on December 31, 2007.
Business Guidance for Full Year 2009
The company expects its full year 2009 net revenue to be at least 20% higher than its full year 2008 net revenue.
The company also projects its full year 2009 non-GAAP EPS to grow 20% over its non-GAAP EPS for full year 2008.
The company projects its capital expenditure for 2009 to be in the range of $40 million to $60 million.
“Despite the continued economic challenges we are all witnessing, we are confident Mindray can achieve at least 20% revenue growth in 2009, with stronger growth coming in the second half of the year,” commented Li Xiting, Mindray’s president and co-chief executive officer. “For 2009, we will continue to work towards a successful integration of DPM to improve our product and geographic mix and offer cross-selling and market share gain opportunities. We hope to gain market share based on the increasing attractiveness of our high performance-price products to an increasingly cost-conscious customer base. In addition, to improve our international distribution platform, we plan to expand and localize our international distribution teams at reasonable costs. Mindray is well positioned to navigate these unprecedented times and to capitalize on any opportunities that may emerge because of the diversity of our product offering across a range of price points, our ability to closely manage costs, and the strength of our balance sheet.”