China Digital TV Announces Unaudited Third Quarter 2013 Results

       China Digital TV Announces Unaudited Third Quarter 2013 Results

PR Newswire

BEIJING, Nov. 19, 2013

BEIJING, Nov. 19, 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 third quarter
ended September 30, 2013.

Highlights for the Third Quarter 2013

  oNet revenues in the third quarter of 2013 were US$23.1 million,
    representing a 13.5% increase from the same period in 2012 and a 26.9%
    increase from the second quarter of 2013.
  oChina Digital TV shipped approximately 4.76 million smart cards in the
    third quarter of 2013, compared to 3.84 million in the same period in 2012
    and 3.58 million in the second quarter of 2013.
  oGross margin in the third quarter of 2013 was 74.0%, compared to 75.8% in
    the same period in 2012 and 76.7% in the second quarter of 2013.
  oDiluted earnings per American depositary share (one ADS representing one
    ordinary share), or ADS, in the third quarter of 2013 were US$0.08,
    compared to net loss US$0.19 in the same period in 2012.

"China Digital TV is pleased to announce that our smart card shipments and
revenue for the third quarter of 2013 exceeded our guidance, as we saw solid
demand in several key cable TV markets during the ongoing digitalization
conversion period," said Mr. Jianhua Zhu, China Digital TV's chairman and
chief executive officer. "Demand was largely driven by our major customers,
including those in Jiangsu, Zhejiang and Guangdong provinces."

Mr. Zhu continued, "As critical priorities of our ongoing diversification
strategy, we are steadily building up the strength of our value added services
offering in mainland China and smart card business in overseas markets. In the
third quarter, in addition to our solid performance in mainland China, we made
good progress in developing our smart card business in Taiwan, Thailand and
other overseas markets, where we saw both sequential and year-over-year growth
in revenues as a portion of China Digital TV's overall revenue. We also saw
promising development in our cloud computing and video-on-demand offerings and
we expect to see steady progress in these services in the coming quarters. We
believe these value added services will contribute to the company's long-term
growth."

Mr. Zhenwen Liang, China Digital TV's chief financial officer, commented,
"China Digital TV is pleased that our continued focus on key provincial
operators, overseas markets with strong potential and diversification of our
CA business helped us deliver strong top-line results, despite the industry
trend toward lower average selling price ("ASP") of smart cards. We will
continue to focus on strong execution to minimize the impact of the lower ASP
on our financial performance."

Third  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 third quarter of 2013, China Digital TV generated net revenues of
US$23.1 million, an increase of 13.5% from the third quarter of 2012 and an
increase of 26.9% from the second quarter of 2013. The year-over-year and
quarter-over-quarter increases in net revenues were mainly due to increases in
sales of smart cards.

In the third quarter of 2013, revenues from the Company's top five customers
accounted for 26.2% of total revenues, compared to 23.3% in the second quarter
of 2013.

Revenue Breakdown

                             For the three months ended
                             September 30,  June 30,  September 30,
                             2013           2013      2012
                             (in thousands of U.S. dollars)
Products:
Smart cards                  $    21,315    $ 16,426  $    18,463
Other products                    1,001       1,115        1,158
Subtotal                          22,316      17,541       19,621
Services:
Head-end system integration       286         250          436
Head-end system development       235         190          359
Licensing income                  335         290          204
Royalty income                    279         218          55
Other service                     1           36           23
Subtotal                          1,136       984          1,077
Total revenues               $    23,452    $ 18,525  $    20,698

Revenues from smart cards and other products were US$22.3 million in the third
quarter of 2013, an increase of 13.7% from the same period in 2012 and an
increase of 27.2% from the second quarter of 2013. The year-over-year and
quarter-over-quarter increases were mainly due to increases in smart cards
shipment volumes. Sales of smart cards and other products accounted for 95.2%
of total revenues in the third quarter of 2013, compared to 94.7% in the
second quarter of 2013.

Revenues from services were US$1.1 million in the third quarter of 2013, an
increase of 5.5% from the same period in 2012 and an increase of 15.4% from
the second quarter of 2013. Revenues from services accounted for 4.8% of total
revenues in the third quarter of 2013. The year-over-year and
quarter-over-quarter increases were primarily due to increases in royalty
income and licensing income.

Gross profit in the third quarter of 2013 was US$17.1 million, an increase of
10.8% from the same period in 2012 and an increase of 22.4% from the second
quarter of 2013. Gross margin, which is equal to gross profit divided by net
revenues, was 74.0% in the third quarter of 2013, compared to 75.8% in the
same period in 2012 and 76.7% in the second quarter of 2013. The
year-over-year and quarter-over-quarter decreases in gross margin were
primarily due to an increase in cost of revenues, attributable to inventory
write-downs with respect to integrated chips and multimedia home entertainment
boxes.

In the third quarter of 2013, the ASP of smart cards decreased by 2.3%
compared to the second quarter of 2013. In addition, the unit cost of smart
cards decreased by 7.0% compared to the second quarter of 2013.

Operating expenses in the third quarter of 2013 were US$11.2 million, an
increase of 7.1% from the same period in 2012 and an increase of 5.2% from the
second quarter of 2013.

  oResearch and development expenses for the third quarter of 2013 were
    US$5.3 million, an increase of 7.0% from the same period in 2012 and an
    increase of 8.9% from the second quarter of 2013. The year-over-year and
    quarter-over-quarter increases were mainly due to an increase in project
    development expenses. 
  oSelling and marketing expenses for the third quarter of 2013 were US$3.5
    million, an increase of 8.9% from the same period in 2012 and an increase
    of 0.3% from the second quarter of 2013. The year-over-year increase was
    mainly due to an increase in marketing expenditures. The selling and
    marketing expenses remained relatively stable quarter-over-quarter.
  oGeneral and administrative expenses for the third quarter of 2013 were
    US$2.3 million, an increase of 4.6% from the same period in 2012 and an
    increase of 4.5% from the second quarter of 2013. The year-over-year
    increase was mainly due to increases in allowance for doubtful accounts,
    as well as in average salary and headcount of general and administrative
    staff. The quarter-over-quarter increase was primarily due to an increase
    in the contribution to employment security funds for disabled workers.

Income from operations in the third quarter of 2013 was US$5.9 million, an
18.7% increase from the same period in 2012 and a 77.5% increase from the
second quarter of 2013.

Operating margin, defined as income from operations divided by net revenues,
in the third quarter of 2013 was 25.6%, compared to 24.5% in the same period
in 2012 and 18.3% in the second quarter of 2013.

Interest income  in the third quarter of 2013 was US$0.5 million, a 62.2%
decrease from the same period in 2012 and a 29.9% increase from the second
quarter of 2013.

Income tax expenses in the third quarter of 2013 was US$2.1 million, compared
to US$13.6 million in the same period of 2012 and US$2.1 million in the second
quarter of 2013. The year-over-year decrease in income tax expenses was mainly
attributable to a decrease in withholding taxes for undistributed retained
earnings. In the third quarter of 2012, the Company management decided to
distribute part of the retained earnings of the Company's PRC subsidiaries.
The Company accrued and recorded US$12.1 million of withholding taxes for such
undistributed retained earnings in the third quarter of 2012. The income tax
expenses remained relatively stable quarter-over-quarter, due to higher
withholding taxes in the second quarter of 2013 offset by an increase in
taxable income in the third quarter of 2013. In the second quarter of 2013,
the Company accrued additional withholding taxes for undistributed retained
earnings as a result of the partially reversed income tax expenses after the
Company's PRC operating subsidiary, Beijing Super TV Co., Ltd., was designated
"key software enterprise" for the tax years of 2011 and 2012.

Net loss attributable to noncontrolling interest in the third quarter of 2013
was US$0.5 million, an increase of 19.1% from the same period in 2012 and an
increase of 42.7% from the second quarter of 2013. The year-over-year and
quarter-over-quarter increases were largely due to increases in net loss of
the Company's majority-owned subsidiaries.

Net income attributable to China Digital TV Holding Co., Ltd. in the third
quarter of 2013 was US$4.7 million, compared to a US$11.4 million net loss
attributable to China Digital TV in the same period in 2012 and a US$1.8
million net income attributable to China Digital TV in the second 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
impairment loss on long-term investments, share-based compensation expenses,
amortization of acquired intangible assets from business acquisitions and
equity method investments, in the third quarter of 2013 was US$5.2 million,
compared to a US$6.2 million non-GAAP net loss attributable to China Digital
TV in the same period in 2012 and a US$2.4 million non-GAAP net income
attributable to China Digital TV in the second 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 September 30, 2013, China Digital TV had cash and cash equivalents and
restricted cash totaling US$69.4 million. In the third quarter of 2013, cash
flow generated from operations was approximately US$8.4 million.

Business Outlook

Based on information available as of November 19, 2013, China Digital TV
expects smart card shipment volumes for the fourth quarter of 2013 to be in
the range of 3.9 million to 4.2 million. Net revenues for the fourth quarter
of 2013 are expected to be in the range of US$17.6 million to US$18.9 million.

Conference Call Information

The Company will hold an earnings conference call at 7:00 p.m. on Tuesday,
November 19, 2013, U.S. Eastern Time (8:00 a.m. on Wednesday, November 20,
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 10:00 p.m. on
November 19, 2013 and 11:59 p.m. on November 26, 2013 U.S. Eastern Time.

Replay Information

United States: +1-855-452-5696
International: +61-2-8199-0299
Passcode:       97394344

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 fourth 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
                                               September30,  June 30,      September30,
                                               2013           2013          2012
Revenues:
Products                                  $  22,316      $ 17,541      $  19,621
Services                                     1,136         984            1,077
Total revenues                                    23,452        18,525         20,698
Business and sales related taxes             (339)         (317)          (341)
Net revenues                                      23,113        18,208         20,357
Cost of revenues:
Products                                     (4,927)       (3,356)        (3,901)
Services                                     (1,089)       (886)          (1,030)
Total cost of revenues                            (6,016)       (4,242)        (4,931)
Gross profit                                      17,097        13,966         15,426
Operating expenses:
Research and development expenses            (5,309)       (4,873)        (4,960)
Selling and marketing expenses               (3,528)       (3,516)        (3,241)
General and administrative expenses          (2,343)       (2,243)        (2,241)
Total operating expenses                          (11,180)      (10,632)       (10,442)
Income from operations                            5,917         3,334          4,984
Interest income                              508           391            1,343
Impairment loss on long-term investments     -             -              (4,487)
Other income / (expenses)                    4             (21)           170
Income before income taxes                        6,429         3,704          2,010
Income tax expenses
Income tax-current                           (1,641)       (1,278)        (1,718)
Income tax-deferred                          (508)         (779)          (11,899)
Netincome/(loss)beforenetincomefrom
                                                  4,280         1,647          (11,607)
equity method investments
Net loss from equity method investments,
                                                  (29)          (216)          (235)
net of income taxes
Net income / (loss)                               4,251         1,431          (11,842)
Net loss attributable to noncontrolling           498           349            418
interest
Net income / (loss) attributable to China
                                               $  4,749       $ 1,780       $  (11,424)
Digital TV Holding Co., Ltd. shareholders
Netincome/(loss)pershareattributableto

ordinary shareholders of China Digital TV

Holding Co., Ltd.
Basic                                         $  0.08        $ 0.03        $  (0.19)
Diluted                                       $  0.08        $ 0.03        $  (0.19)
Net income / (loss)                           $  4,251       $ 1,431       $  (11,842)
Other comprehensive income, net of tax
                                                  189           1,092          1,416
Foreign currency translation adjustment
Comprehensive income / (loss)                     4,440         2,523          (10,426)
Comprehensive loss attributable to
                                                  494           325            385
noncontrolling interest
Comprehensive income / (loss) attributable to

ordinary shareholders of China Digital         $  4,934       $ 2,848       $  (10,041)

TV Holding Co., Ltd.
Weighted average shares used in calculating

net income / (loss) per ordinary share
Basic                                            59,110,789    59,103,170     59,004,438
Diluted                                          59,131,310    59,123,852     59,004,438

China Digital TV Holding Co., Ltd.
Unaudited Condensed Consolidated Balance Sheets
(in thousands of U.S. dollars)
ASSETS                                             September30,  December31,
                                                   2013           2012
Current assets:
Cash and cash equivalents                    $   68,575     $   130,697
Restricted cash                                   791            18
Notes receivable                                  2,940          4,101
Accounts receivable, net                          40,968         38,283
Inventories, net                                  5,017          5,678
Prepaid expenses and other current assets        8,188          5,245
Deferred costs-current                           182            299
Deferred tax assets - current                     2,283          1,503
Total current assets                                 128,944        185,824
Long-term receivable                              26             -
Property and equipment, net                     1,280          1,630
Intangible assets, net                            22             198
Goodwill                                         556            547
Equity method investments                         3,551          4,268
Deferred costs - non-current                      241            301
Deferred tax assets - non-current                 792            797
Total assets                                          135,412        193,565
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                 2,335          1,215
Notes payable                                     468            -
Accrued expenses and other current                12,350         12,305
liabilities
Dividend payable                                 57             76,999
Deferred revenue - current                       7,525          7,473
Income tax payable                               1,530          3,476
Deferred tax liabilities - current                7,301          4,812
Government subsidies - current                    163            -
Total current liabilities                             31,729         106,280
Deferred revenue - non-current                   135            255
Government subsidies - non-current                3,889          3,867
Total liabilities                                   35,753         110,402
EQUITY
China Digital TV Holding Co., Ltd. shareholders'

equity:
Ordinary shares                                  30             30
Additional paid-in capital                       31,655         29,724
Statutory reserve                                17,856         17,856
Retained earnings                                 21,132         6,765
Accumulated other comprehensive income           27,788         26,083
Total China Digital TV Holding Co., Ltd.
                                                       98,461         80,458
shareholders' equity
Noncontrolling interest                                1,198          2,705
Total equity                                           99,659         83,163
TOTAL LIABILITIES AND EQUITY                      $   135,412    $   193,565

Reconciliation of Non-GAAP Measures

Non-GAAP net income (loss) attributable to China Digital TV Holding Co., Ltd.
shareholders excludes certain one-time or non-cash expenses, such as
impairment loss on long-term investments, 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
(loss) 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
                                        September30,  June 30,  September30,
                                        2013           2013      2012
                                        (in U.S. dollars, in thousands)
Net income / (loss) attributable to
China Digital
                                        $    4,749     $  1,780  $   (11,424)
TV Holding Co., Ltd. shareholders-
GAAP
Share-based compensation expenses            433          540        646
Amortization of intangible assets from
business
                                             54           54         88
acquisitions and equity method
investments
Impairment loss on long-term                 -            -          4,487
investments
Net income / (loss) attributable to
China Digital
                                        $    5,236     $  2,374  $   (6,203)
TV Holding Co., Ltd. shareholders -
Non-GAAP



SOURCE China Digital TV Holding Co., Ltd.

Website: http://ir.chinadtv.cn
 
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