China Digital TV Announces Unaudited Second Quarter 2013 Results

       China Digital TV Announces Unaudited Second Quarter 2013 Results

PR Newswire

BEIJING, Aug. 20, 2013

BEIJING, Aug. 20, 2013 /PRNewswire/ -- China Digital TV Holding Co., Ltd.
(NYSE: STV) ("China Digital TV" or the "Company"), the leading provider of
conditional access ("CA") systems to China's  expanding digital television
market, today announced its unaudited financial results for the second quarter
ended June 30, 2013.

Highlights for the Second Quarter 2013

  oNet revenues in the second quarter of 2013 were US$18.2 million,
    representing a 22.5% decrease from the same period in 2012 and an 8.6%
    decrease from the first quarter of 2013.
  oChina Digital TV shipped approximately 3.58 million smart cards in the
    second quarter of 2013, compared to 3.74 million in the same period in
    2012 and 3.71 million in the first quarter of 2013.
  oGross margin in the second quarter of 2013 was 76.7%, compared to 76.4% in
    the same period in 2012 and 73.4% in the first quarter of 2013.
  oDiluted earnings per American depositary share (one ADS representing one
    ordinary share), or ADS, in the second quarter of 2013 were US$0.03,
    compared to US$0.12 in the same period in 2012.

"Despite a range of challenges, including those posed by competition from IPTV
and over-the-top ("OTT") services, and the stronger negotiating position
cableoperators have for pricing following provincial network consolidation
completion, China Digital TV was able to meet our revenue guidance for the
second quarter of 2013," said Mr. Jianhua Zhu, China Digital TV's chairman and
chief executive officer. "We saw steady demand and performance during the
second quarter in several key provinces, including Zhejiang, Jiangsu,
Guangdong and Shandong. We are beginning to see conversion to high definition
drive demand for our smart cards and we expect this trend to continue during
the second half of the year."

Mr. Zhu continued, "The overseas market remains a key focus for driving China
Digital TV's growth over the long-term, and we made good progress in Taiwan
and other localities during the past quarter. As part of our diversification
strategy, we continue to develop our cloud computing andvideo on
demandofferings and network broadcast platform, and are in active discussions
with potential partners to make these offerings even stronger.
Intelligentization in areas like Internet TV, OTT set-top boxes and allowing
users to view content across multiple platforms is beginning to drive
operators' demand for our value-added service platforms, which is a trend we
expect to gain strength going forward."

Mr. Zhenwen Liang, China Digital TV's chief financial officer, commented,
"China Digital TV is working to continue improving execution in response to
the impact that industry challenges following provincial network consolidation
had onour accounts receivables and the average selling price ("ASP") of smart
cards during the second quarter of 2013. Looking forward, we will continue to
prioritize investment in value-added services with high growth potential."

Second  Quarter 2013 Results

(Note: Unless otherwise stated, all financial statement measures stated in
this press release are based on generally accepted accounting principles in
the United States ("U.S. GAAP").)

In the second quarter of 2013, China Digital TV generated net revenues of
US$18.2 million, a decrease of 22.5% from the second quarter of 2012 and a
decrease of 8.6% from the first quarter of 2013. The year-over-year decrease
in net revenues was mainly due to decreases in the sales of other products,
such as surface mounted device chipsets and multimedia home entertainment
boxes, as well as a decline in the sales of smart cards. The
quarter-over-quarter decrease in net revenues was primarily due to a decline
in revenues from head-end system integration and sales of smart cards.

In the second quarter of 2013, revenues from the Company's top five customers
accounted for 23.3% of total revenues, compared to 18.3% in the first quarter
of 2013.

Revenue Breakdown

                             For the three months ended
                             June 30,   March 31,  June 30,
                             2013       2013       2012
                             (in thousands of U.S. dollars)
Products:
Smart cards                  $  16,426  $  17,155  $ 18,209
Other products                  1,115      978       4,090
Subtotal                        17,541     18,133    22,299
Services:
Head-end system integration     250        1,664     714
Head-end system development     190        194       207
Licensing income                290        214       445
Royalty income                  218        (31)      125
Other service                   36         40        16
Subtotal                        984        2,081     1,507
Total revenues               $  18,525  $  20,214  $ 23,806

Revenues from smart cards and other products were US$17.5 million in the
second quarter of 2013, a decrease of 21.3% from the same period in 2012 and a
decrease of 3.3% from the first quarter of 2013. The year-over-year decrease
was primarily due to a decrease in revenues from the sales of other products,
such as surface mounted device chipsets and multimedia home entertainment
boxes, as well as declines in both shipment volumes and ASP of smart cards.
The quarter-over-quarter decrease was primarily due to a decrease in the
shipment volumes of smart cards. Sales of smart cards and other products
accounted for 94.7% of total revenues in the second quarter of 2013, compared
to 89.7% in the first quarter of 2013.

Revenues from services were US$1.0 million in the second quarter of 2013, a
decrease of 34.7% from the same period in 2012 and a decrease of 52.7% from
the first quarter of 2013. Revenues from services accounted for 5.3% of total
revenues in the second quarter of 2013. The year-over-year and
quarter-over-quarter decreases were primarily due to a decrease in revenues
from head-end system integration.

Gross profit in the second quarter of 2013 was US$14.0 million, a decrease of
22.1% from the same period in 2012 and a decrease of 4.5% from the first
quarter of 2013. Gross margin, which is equal to gross profit divided by net
revenues, was 76.7% in the second quarter of 2013, compared to 76.4% in the
same period in 2012 and 73.4% in the first quarter of 2013. The year-over-year
increase in gross margin was primarily due to an increase in the proportion of
total revenues accounted for by net revenues from smart card sales, which have
a higher gross margin than other products. The quarter-over-quarter increase
in gross margin was primarily due to an increase of gross profit related to a
higher total cost of revenues in last quarter.

In the second quarter of 2013, ASP of smart cards decreased by 0.9% compared
to the first quarter of 2013. In addition, the unit cost of smart cards
increased by 4.9% compared to the first quarter of 2013.

Operating expenses in the second quarter of 2013 were US$10.6 million, an
increase of 0.8% from the same period in 2012 and a decrease of 12.9% from the
first quarter of 2013.

  oResearch and development expenses for the second quarter of 2013 were
    US$4.9 million, an increase of 14.7% from the same period in 2012 and a
    decrease of 1.4% from the first quarter of 2013. The year-over-year
    increase was mainly due to an increase in labor expenses and office rents.
    It remained relatively stable quarter-over-quarter. 
  oSelling and marketing expenses for the second quarter of 2013 were US$3.5
    million, an increase of 2.5% from the same period in 2012 and a decrease
    of 11.9% from the first quarter of 2013. The year-over-year increase was
    mainly attributable to higher marketing expenditures, which was partially
    offset by a decline in labor expenses relating to the decreased number of
    headcount of sales and marketing staff. The quarter-over-quarter decrease
    was primarily due to a decrease in marketing expenditure and share-based
    compensation expenses relating to options granted to employees.
  oGeneral and administrative expenses for the second quarter of 2013 were
    US$2.2 million, a decrease of 21.7% from the same period in 2012 and a
    decrease of 31.4% from the first quarter of 2013. The year-over-year and
    quarter-over-quarter decreases were primarily due to decreases in
    allowance for doubtful accounts, share-based compensation expenses
    relating to options granted to employees and consulting fee.

Income from operations in the second quarter of 2013 was US$3.3 million, a
54.9% decrease from the same period in 2012 and a 37.4% increase from the
first quarter of 2013.

Operating margin, defined as income from operations divided by net revenues,
in the second quarter of 2013 was 18.3%, compared to 31.5% in the same period
in 2012 and 12.2% in the first quarter of 2013.

Interest income  in the second quarter of 2013 was US$0.4 million, a 76.7%
decrease from the same period in 2012 and a 2.0% decrease from the first
quarter of 2013.

Income tax expenses in the second quarter of 2013 was US$2.1 million, compared
to US$1.8 million in income tax expenses in the same period of 2012 and US$4.5
million in income tax benefits in the first quarter of 2013. The
year-over-year increase in income tax expenses was mainly attributable to an
increase in withholding taxes, which was partially offset by a decline in
taxable income.As the management determines to distribute part of the
retained earnings of the Company's PRC subsidiaries, the Company has accrued
and recorded withholding taxes for such undistributed retained earnings since
the third quarter of 2012.The US$4.5 million in income tax benefits in the
first quarter of 2013 was mainly due to a change in the income tax rate
applicable to the Company's PRC operating subsidiary, Beijing Super TV Co.,
Ltd.In the first quarter of 2013, the subsidiary was designated as a "key
software enterprise" for the tax years of 2011 and 2012 by the relevant PRC
government authorities and, as a result, was entitled to a preferential income
tax rate of 10% in each of those years. As the Company accrued income tax
expenses at a rate of 15% in 2011 and 2012, the accrued income tax expenses
were partially reversed in the first quarter of 2013.

Net loss attributable to noncontrolling interest in the second quarter of 2013
was US$0.3 million, a decrease of 8.4% from the same period in 2012 and a
decrease of 50.8% from the first quarter of 2013. The year-over-year and
quarter-over-quarter decreases were largely due to decreases in net loss of
the Company's majority-owned subsidiaries.

Net income attributable to China Digital TV Holding Co., Ltd. in the second
quarter of 2013 was US$1.8 million, a decrease of 75.1% from the same period
in 2012 and a decrease of 77.3% from the first quarter of 2013.

Non-GAAP net income attributable to China Digital TV Holding Co., Ltd. 
defined as net income excluding certain one time or non-cash expenses, such as
share-based compensation expenses, amortization of acquired intangible assets
from business acquisitions and equity method investments, in the second
quarter of 2013 was US$2.4 million, a decrease of 70.3% from the same period
in 2012 and a decrease of 73.2% from the first quarter of 2013. For more
information on these non-GAAP financial measures, please see the tables
captioned "Reconciliations of non-GAAP measures" set forth at the end of this
release.

Balance Sheet and Cash Flow

As of June 30, 2013, China Digital TV had cash and cash equivalents and
restricted cash totaling US$60.1 million. In the second quarter of 2013, cash
flow generated from operations was approximately US$5.8 million.

Business Outlook

Based on information available as of Aug 20, 2013, China Digital TV expects
smart card shipment volumes for the third quarter of 2013 to be in the range
of 3.6 million to 3.9 million. Net revenues for the third quarter of 2013 are
expected to be in the range of US$ 16.7 million to US$18.1 million.

Conference Call Information

The Company will hold an earnings conference call at 8:00 p.m. on Tuesday, Aug
20, 2013, U.S. Eastern Time (8:00 a.m. on Wednesday, Aug 21, 2013,
Beijing/Hong Kong Time).

Conference Call Dial-in Information

United States Toll Free: +1-866-519-4004
International:           +65-6723-9381
Hong Kong:               +852-2475-0994
China Toll Free:         +400-620-8038 and +800-819-0121 
Passcode:               China Digital TV Earnings Call

Please dial-in ten minutes before the call is scheduled to begin and provide
the passcode to join the call.

A replay of the call will be available for one week between 11:00 p.m. on Aug
20, 2013 and 11:59 p.m. on Aug 27, 2013, U.S. Eastern Time.

Replay Information

United States: +1-855-452-5696
International: +61-2-8199-0299
Passcode:      27589715

In addition, a live and archived webcast of this conference call will be
accessible through the Investor Relations section of China Digital TV's
website at http://ir.chinadtv.cn.

Safe Harbor Statements

This announcement contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
are made under the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995.

These forward-looking statements can be identified by terminology such as
"will," "expects," "anticipates," "future," "intends," "plans," "believes,"
"estimates," "may," "should" and similar expressions. Such forward-looking
statements include, without limitation, statements regarding the outlook for
the third quarter of 2013 and comments by management in this announcement
about trends in the CA systems, digital television, cable television and
related industries in the PRC and China Digital TV's strategic and operational
plans and future market positions. China Digital TV may also make
forward-looking statements in its periodic reports filed with the U.S.
Securities and Exchange Commission, in its annual report to shareholders, in
press releases and other written materials and in oral statements made by its
officers, directors or employees to third parties. Statements that are not
historical facts, including statements about China Digital TV's beliefs and
expectations, are forward-looking statements. Forward-looking statements
involve inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from projections contained or implied in
any forward-looking statement, including but not limited to the following:
competition in the CA systems, digital television, cable television and
related industries in the PRC and the impact of such competition on prices,
our ability to implement our business strategies, changes in technology, the
progress of the television digitalization in the PRC, the structure of the
cable television industry or television viewer preferences, changes in PRC
laws, regulations or policies with respect to the CA systems, digital
television, cable television and related industries, including the extent of
non-PRC companies' participation in such industries, and changes in political,
economic, legal and social conditions in the PRC, including the government's
policies with respect to economic growth, foreign exchange and foreign
investment.

Further information regarding these and other risks and uncertainties is
included in our annual report on Form 20-F and other documents filed with the
U.S. Securities and Exchange Commission. China Digital TV does not assume any
obligation to update any forward-looking statements, which apply only as of
the date of this press release.

About China Digital TV

Founded in 2004, China Digital TV is China's leading provider of conditional
access (CA) systems, which prevent unauthorized access to subscriber content
across the country's digital cable, satellite, terrestrial, IPTV and mobile
television networks. China Digital TV has provided CA systems to more than 300
digital television network operators across mainland China. The Company is
also a leading provider of value-added services to China's rapidly expanding
digital TV market.

For more information please visit the Investor Relations section of China
Digital TV's website at http://ir.chinadtv.cn. The information contained in
that website is not a part of this announcement.

For investor and media inquiries, please contact:

In China:

Nan Hao
China Digital TV
Tel: +86.10.6297.1199 ext.9780
Email: ir@chinadtv.cn

Josh Gartner
Brunswick Group LLC
Tel: +86.10.5960.8600
Email: chinadigital@brunswickgroup.com

In the US:

Cindy Zheng
Brunswick Group LLP
Tel: +1.212.333.3810
Email: chinadigital@brunswickgroup.com



China Digital TV Holding Co., Ltd.
Unaudited Condensed Consolidated Statements of Comprehensive Income
(in thousands of U.S. dollars, except share and per share data)
                                             For the three months ended
                                             June 30,      March 31,     June 30,
                                             2013          2013          2012
Revenues:
Products                                  $ 17,541      $ 18,133      $ 22,299
Services                                    984           2,081         1,507
Total revenues                                 18,525        20,214        23,806
Business and sales related taxes            (317)         (288)         (324)
Net revenues                                   18,208        19,926        23,482
Cost of revenues:
Products                                    (3,356)       (3,661)       (4,587)
Services                                    (886)         (1,637)       (963)
Total cost of revenues                         (4,242)       (5,298)       (5,550)
Gross profit                                   13,966        14,628        17,932
Operating expenses:
Research and development expenses           (4,873)       (4,942)       (4,249)
Selling and marketing expenses              (3,516)       (3,992)       (3,429)
General and administrative expenses         (2,243)       (3,268)       (2,865)
Total operating expenses                       (10,632)      (12,202)      (10,543)
Income from operations                         3,334         2,426         7,389
Interest income                             391           399           1,676
Interest expense                            -             -             (195)
Loss from forward contract                    -             -             (125)
Other (expenses) / income                   (21)          (58)          75
Income before income taxes                     3,704         2,767         8,820
Income tax (expenses) / benefits
Income tax-current                          (1,278)       4,974         (1,982)
Income tax-deferred                         (779)         (429)         176
Net income before net income from equity
                                               1,647         7,312         7,014
method investments
Net (loss) from equity method investments,
                                               (216)         (184)         (253)
net of income taxes
Net income                                     1,431         7,128         6,761
Net loss attributable to noncontrolling        349           710           381
interest
Net income attributable to China Digital TV
                                             $ 1,780       $ 7,838       $ 7,142
Holding Co., Ltd. shareholders
Net income per share attributable to
ordinary

shareholders of China Digital TV Holding
Co.,

Ltd.
Basic                                        $ 0.03        $ 0.13        $ 0.12
Diluted                                      $ 0.03        $ 0.13        $ 0.12
Net income                                   $ 1,431       $ 7,128       $ 6,761
Other comprehensive income / (loss), net of
tax                                            1,092         459           (2,043)

Foreign currency translation adjustment
Comprehensive income                           2,523         7,587         4,718
Comprehensive loss attributable to
                                               325           703           415
noncontrolling interest
Comprehensive income attributable to

ordinaryshareholders of China Digital       $ 2,848       $ 8,290       $ 5,133

TV Holding Co., Ltd.
Weightedaveragesharesusedincalculating

net income per ordinary share
Basic                                          59,103,170    59,100,994    58,999,695
Diluted                                        59,123,852    59,121,695    59,091,468



China Digital TV Holding Co., Ltd.
Unaudited Condensed Consolidated Balance Sheets
(in thousands of U.S. dollars)
ASSETS                                          June 30,   December 31,
                                                2013       2012
Current assets:
 Cash and cash equivalents                      $ 59,447   $  130,697
 Restricted cash                                  644         18
 Notes receivable                                 3,862       4,101
 Accounts receivable, net                         39,074      38,283
 Inventories, net                                 5,401       5,678
 Prepaid expenses and other current assets        9,565       5,245
 Deferred costs-current                           235         299
 Deferred tax assets - current                    1,936       1,503
Total current assets                              120,164     185,824
 Long-term receivable                             102         -
 Property and equipment, net                      1,403       1,630
 Intangible assets, net                           71          198
 Goodwill                                         555         547
 Equity method investments                        3,570       4,268
 Deferred costs - non-current                     330         301
 Deferred tax assets - non-current                816         797
Total assets                                      127,011     193,565
LIABILITIES AND EQUITY
Current liabilities:
 Accounts payable                                 1,819       1,215
 Notes payable                                    311         -
 Accrued expenses and other current liabilities   10,780      12,305
 Dividend payable                                 151         76,999
 Deferred revenue - current                       7,704       7,473
 Income tax payable                               761         3,476
 Deferred tax liabilities - current               6,469       4,812
Total current liabilities                         27,995      106,280
 Deferred revenue - non-current                   198         255
 Government subsidies                             4,041       3,867
Total liabilities                                 32,234      110,402
EQUITY
China Digital TV Holding Co., Ltd. shareholders'

equity:
 Ordinary shares                                  30          30
 Additional paid-in capital                       31,217      29,724
 Statutory reserve                                17,856      17,856
 Retained earnings                                16,383      6,765
 Accumulated other comprehensive income           27,603      26,083
Total China Digital TV Holding Co., Ltd.
                                                  93,089      80,458
shareholders' equity
Noncontrolling interest                           1,688       2,705
Total equity                                      94,777      83,163
TOTAL LIABILITIES AND EQUITY                    $ 127,011  $  193,565



Reconciliation of Non-GAAP Measures
Non-GAAP net income attributable to China Digital TV Holding Co., Ltd.
shareholders excludes certain one-time or non-cash expenses, such as
share-based compensation expenses, amortization of intangible assets acquired
from business acquisitions and equity method investments. The Company believes
that the non-GAAP net income provides meaningful supplemental information
regarding the Company's performance and liquidity by excluding certain
non-cash expenses that may not be indicative of its operating performance from
a cash flow perspective. The Company believes that both management and
investors benefit from referring to this additional information in assessing
the Company's performance and when planning and forecasting future periods.
                                                   For the three months
                                                   ended
                                                   June 30,   March    June
                                                              31,      30,
                                                   2013       2013     2012
                                                   (in U.S. dollars, in
                                                   thousands)
Net income attributable to China Digital TV
                                                   $   1,780  $ 7,838  $ 7,142
Holding Co., Ltd. shareholders – GAAP
Share-based compensation expenses                      540      956      773
Amortizationofintangibleassetsfrombusiness
                                                       54       54       88
acquisitions and equity method investments
Net income attributable to China Digital TV        $   2,374  $ 8,848  $ 8,003
Holding Co., Ltd. shareholders - Non-GAAP

SOURCE China Digital TV Holding Co., Ltd.

Website: http://ir.chinadtv.cn