China Digital TV Announces Unaudited First Quarter 2014 Results

       China Digital TV Announces Unaudited First Quarter 2014 Results

PR Newswire

BEIJING, May 20, 2014

BEIJING, May 20, 2014 /PRNewswire/ -- China Digital TV Holding Co., Ltd.
(NYSE: STV) ("China Digital TV" or the "Company"), the leading provider of
conditional access ("CA") systems and comprehensive services to China's
expanding digital television market, today announced its unaudited financial
results for the first quarter ended March 31, 2014.

Highlights for the First Quarter2014

  oNet revenues in the first quarter of 2014 were US$18.2 million,
    representing an 8.7% decrease from the same period in 2013 and a 29.8%
    decrease from the fourth quarter of 2013.
  oChina Digital TV shipped approximately 3.56 million smart cards in the
    first quarter of 2014, compared to 3.71 million in the same period in 2013
    and 4.95 million in the fourth quarter of 2013.
  oGross margin in the first quarter of 2014 was 78.6%, compared to 73.4% in
    the same period in 2013 and 76.4% in the fourth quarter of 2013.
  oDiluted earnings per American depositary share (one ADS representing one
    ordinary share), or ADS, in the first quarter of 2014 were US$0.07,
    compared to US$0.13 in the same period in 2013 and US$0.17 in the fourth
    quarter of 2013.

"We are pleased to report that China Digital TV's first quarter 2014 smart
card shipments and net revenues were in line with our guidance," said Mr.
Jianhua Zhu, China Digital TV's chairman and chief executive officer. "Our
traditional smart card business saw relatively steady shipments on an annual
basis on the strength of solid domestic demand from Jiangsu, Guangdong,
Jiangxi and other key regions of China. In the first quarter, China Digital TV
continued to maintain a strong leading position in the Chinese smart card
market with a 52% share."

Mr. Zhu continued, "As part of our diversification strategy to increase our
focus on value-added services, we signed strategic cooperative cloud computing
services agreements with cable operators including Beijing Gehua and Jishi
Media. In an important step, we began signing contracts with IPTV operators to
deploy our cloud computing platforms, including with the Guangdong and Fujian
branches of China Telecom, during the first quarter. In addition, we also
continued our cooperation with Xiaomi to support its smart-TV products with
DVB and OTT services. China Digital TV will continue to seek cooperation with
more smart-TV manufacturers and cable operators to achieve mutually beneficial
results, while simultaneously growing our international smart card business,
where we continue to see encouraging progress."

Mr. Zhenwen Liang, China Digital TV's chief financial officer, commented,
"Effective execution by our team reduced our overall operating expenses and
increased our operating margins compared to the same period last year. We will
continue to evaluate the best ways to manage our operating expenses and
improve our overall efficiency. China Digital TV also recently issued our
fifth special cash dividend to shareholders as part of our ongoing efforts to
maximize shareholder value, and we will continue to evaluate our policy in
this area in the quarters ahead."

First Quarter 2014 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 first quarter of 2014, China Digital TV generated net revenues of
US$18.2 million, a decrease of 8.7% from the first quarter of 2013 and a
decrease of 29.8% from the fourth quarter of 2013. The year-over-year decrease
was primarily due to decreases in revenue from the sales of smart cards and
services, which were partially offset by an increase in revenue from other
products, such as surface mounted chips. The quarter-over-quarter decrease was
primarily due to a decrease in net revenues from sales of smart cards caused
by seasonality associated with the Chinese New Year holiday.

In the first quarter of 2014, revenues from the Company's top five customers
accounted for 25.0% of total revenues, compared to 25.8% in the fourth quarter
of 2013.

Revenue Breakdown

                             For the three months ended
                             March 31,  December 31,  March31,
                             2014       2013          2013
                             (in thousands of U.S. dollars)
Products:
Smart cards                  $  15,591  $   23,360    $ 17,155
Other products                  1,556       1,576       978
Subtotal                        17,147      24,936      18,133
Services:
Head-end system integration     413         531         1,664
Head-end system development     271         484         194
Licensing income                311         259         214
Royalty income                  303         46          (31)
Other service                   127         -           40
Subtotal                        1,425       1,320       2,081
Total revenues               $  18,572  $   26,256    $ 20,214

Revenues from smart cards and other products were US$17.1 million in the first
quarter of 2014, a decrease of 5.4% from the same period in 2013 and a
decrease of 31.2% from the fourth quarter of 2013. The year-over-year decrease
was mainly due to a decrease in smart cards shipment volumes, which was
partially offset by an increase in sales of other products such as surface
mounted chips. The quarter-over-quarter decrease was primarily due to a
decrease in smart card shipment volumes caused by seasonality associated with
the Chinese New Year holiday. Sales of smart cards and other products
accounted for 92.3% of total revenues in the first quarter of 2014, compared
to 95.0% in the fourth quarter of 2013.

Revenues from services were US$1.4 million in the first quarter of 2014, a
decrease of 31.5% from the same period in 2013 and an increase of 8.0% from
the fourth quarter of 2013. The year-over-year decrease was primarily due to a
decrease in revenue from head-end system integration, which was partially
offset by increases in revenues from royalty income and licensing income. The
quarter-over-quarter increase was mainly due to an increase in revenue from
royalty income. Revenues from services accounted for 7.7% of total revenues in
the first quarter of 2014, compared to 5.0% in the fourth quarter of 2013.

Gross profit in the first quarter of 2014 was US$14.3 million, a decrease of
2.3% from the same period in 2013 and a decrease of 27.9% from the fourth
quarter of 2013. Gross margin, which is equal to gross profit divided by net
revenues, was 78.6% in the first quarter of 2014, compared to 73.4% in the
same period in 2013 and 76.4% in the fourth quarter of 2013. The
year-over-year and quarter-over-quarter increases in gross margin were
primarily due to decreases in cost of revenues, attributable to decreased
inventory write-downs with respect to integrated chips and multimedia home
entertainment boxes.

In the first quarter of 2014, the average selling price of smart cards
decreased by 7.1% compared to the fourth quarter of 2013. In addition, the
unit cost of smart cards decreased by 2.1% compared to the fourth quarter of
2013.

Operating expenses in the first quarter of 2014 were US$10.5 million, a
decrease of 13.9% from the same period in 2013 and an increase of 3.5% from
the fourth quarter of 2013.

  oResearch and development expenses in the first quarter of 2014 were US$4.0
    million, a decrease of 18.1% from the same period in 2013 and a decrease
    of 1.9% from the fourth quarter of 2013. The year-over-year decrease was
    primarily due to decreases in personnel related expenses resulting from
    lower headcount, project development expenses, share-based compensation
    and office rent. Research and development expenses remained relatively
    stable quarter-over-quarter.
  oSelling and marketing expenses in the first quarter of 2014 were US$4.1
    million, an increase of 2.0% from the same period in 2013 and an increase
    of 3.8% from the fourth quarter of 2013. The year-over-year and
    quarter-over-quarter increases were mainly due to increases in marketing
    expenses.
  oGeneral and administrative expenses in the first quarter of 2014 were
    US$2.4 million, a decrease of 27.0% from the same period in 2013 and an
    increase of 13.3% from the fourth quarter of 2013. The year-over-year
    decrease was mainly due to a decrease in allowance for doubtful accounts.
    The quarter-over-quarter increase was primarily due to an increase in
    personnel related expenses resulting from increased headcount.

Income from operations in the first quarter of 2014 was US$3.8 million, a
55.9% increase from the same period in 2013 and a 60.8% decrease from the
fourth quarter of 2013.

Operating margin, defined as income from operations divided by net revenues,
in the first quarter of 2014 was 20.8%, compared to 12.2% in the same period
in 2013 and 37.3% in the fourth quarter of 2013.

Interest income in the first quarter of 2014 was US$0.7 million, a 76.9%
increase from the same period in 2013 and a 17.1% increase from the fourth
quarter of 2013.

Income tax expenses in the first quarter of 2014 were US$0.9 million, compared
to US$4.5 million in income tax benefits in the same period of 2013 and US$1.1
million in income tax expenses in the fourth quarter of 2013. In the first
quarter of 2013, the Company's PRC operating subsidiary, Beijing Super TV Co.,
Ltd., 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. The quarter-over-quarter decrease in income tax expenses in the first
quarter of 2014 was mainly due to a decrease in taxable income.

Net loss attributable to noncontrolling interest in the first quarter of 2014
was US$0.2 million, a decrease of 65.9% from the same period in 2013 and a
decrease of 12.0% from the fourth quarter of 2013. The year-over-year and
quarter-over-quarter decreases were largely due to decreases in net losses
recorded by the Company's majority-owned subsidiaries.

Net income attributable to holders of ordinary shares in the first quarter of
2014 was US$4.1 million, a decrease of 48.3% from the same period in 2013 and
a decrease of 59.6% from the fourth quarter of 2013.

Non-GAAP net income attributable to holders of ordinary shares, 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 first quarter of
2014 was US$4.4 million, a decrease of 50.5% from the same period in 2013 and
a decrease of 58.0% from the fourth 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 March 31, 2014, China Digital TV had cash and cash equivalents and
restricted cash totaling US$83.5 million. In the first quarter of 2014, cash
flow generated from operations was approximately US$4.5 million.

Unaudited Additional Information

The Company sets forth at the end of this press release unaudited additional
information relating to the financial results for its CA business, which
consists of smart card products and related other products, such as surface
mounted chips, as well as related services; and other business, which consists
of other products, such as multimedia home entertainment boxes and cloud
computing, as well as related services. In the first quarter of 2014, revenues
from the Company's CA business were US$18.3 million, accounting for 98.7% of
total revenues, and revenues from other business were US$0.2 million,
accounting for 1.3% of total revenues. Gross profit of the CA and other
business in the first quarter of 2014 were US$14.3 million and US$0.004
million, respectively.

Business Outlook

Based on information available as of May 20, 2014, China Digital TV expects
smart card shipment volumes in the second quarter of 2014 to be in the range
of 3.5 million to 3.8 million. Net revenues in the second quarter of 2014 are
expected to be in the range of US$15.4 million to US$16.6 million.

Conference Call Information

The Company will hold an earnings conference call at 8:00 p.m. on Tuesday, May
20, 2014, U.S. Eastern Time (8:00 a.m. on Wednesday, May 21, 2014,
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 10 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 May
20, 2014 and 11:59 p.m. on May 27, 2014 U.S. Eastern Time.

Replay Information

United States:  +1-855-452-5696
International: +61-2-8199-0299
Passcode:       42509836

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 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 second quarter of 2014 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 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
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 the leading provider of CA systems to
China's expanding digital television market. CA systems enable television
network operators to manage the delivery of customized content and services to
their subscribers. China Digital TV conducts substantially all of its business
through its PRC subsidiary, Beijing Super TV Co., Ltd., and its affiliate,
Beijing Novel-Super Digital TV Technology Co., Ltd., as well as subsidiaries
of such affiliate.

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
Investor Relations Manager
Tel: +86-10-6297-1199 x 9780
Email: ir@chinadtv.cn
Josh Gartner
Brunswick Group
Tel: +86-10-5960-8600
Email: chinadigital@brunswickgroup.com

In the United States:

Cindy Zheng
Brunswick Group
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
                          March 31,     December31,     March 31,
Revenues:                 2014          2013             2013
 Products              $ 17,147      $ 24,936         $ 18,133
 Services                1,425         1,320            2,081
Total revenues            18,572        26,256           20,214
 Business and sales      (389)         (339)            (288)
related taxes
Net revenues              18,183        25,917           19,926
Cost of revenues:
 Products                (2,830)       (5,065)          (3,661)
 Services                (1,067)       (1,040)          (1,637)
Total cost of revenues    (3,897)       (6,105)          (5,298)
Gross profit              14,286        19,812           14,628
Operating expenses:
 Research and            (4,048)       (4,127)          (4,942)
development expenses
 Selling and             (4,071)       (3,921)          (3,992)
marketing expenses
 General and
administrative            (2,385)       (2,105)          (3,268)
expenses
Total operating           (10,504)      (10,153)         (12,202)
expenses
Income from operations    3,782         9,659            2,426
 Interest income         706           603              399
 Other income /          268           609              (58)
(expenses)
Income before income      4,756         10,871           2,767
taxes
Income tax
(expenses)/benefits
 Income tax-current      (590)         (468)            4,974
 Income tax-deferred     (330)         (598)            (429)
Net income before net                                  
income from equity
method investments        3,836         9,805            7,312
Net loss from equity
method investments,       (22)          (39)             (184)
net of income taxes
Net income                3,814         9,766            7,128
Net loss attributable
to noncontrolling         242           275              710
interest
Net income                                             
attributable to         $             $                $
holders of ordinary       4,056         10,041           7,838
shares
Net income per share
attributable to
holders
of ordinary shares
Basic                   $ 0.07        $ 0.17           $ 0.13
Diluted                 $ 0.07        $ 0.17           $ 0.13
Net income              $ 3,814       $ 9,766          $ 7,128
Other comprehensive
(loss)/income, net of
tax                       (3,053)       1,164            459

 Foreign currency
translation adjustment
Comprehensive income      761           10,930           7,587
Comprehensive loss
attributable to          263           263              703
noncontrolling
interest
Comprehensive income
attributable to         $ 1,024       $ 11,193         $ 8,290
holders
of ordinary shares
Weighted average
shares used in
calculating net income
per ordinary share
Basic                     59,178,936    59,131,103       59,100,994
Diluted                   60,390,688    59,328,650       59,121,695

China Digital TV Holding Co., Ltd.
Unaudited Condensed Consolidated Balance Sheets
(in thousands of U.S. dollars)
ASSETS                                 March 31,       December 31,
                                       2014            2013
Current assets:
 Cash and cash equivalents             $ 82,574        $   79,085
 Restricted cash                         903               919
 Notes receivable                        6,617             4,484
 Accounts receivable, net                41,593            45,905
 Inventories, net                        5,305             5,027
 Prepaid expenses and other current      3,671             4,032
 assets
 Deferred costs-current                  171               141
 Deferred tax assets - current           2,523             2,546
Total current assets                    143,357           142,139
 Long-term receivable                    179               224
 Property and equipment, net            1,019             1,170
 Intangible assets, net                  -                 6
 Goodwill                                548               563
 Equity method investments               2,535             3,551
 Deferred costs - non-current            290               214
 Deferred tax assets - non-current       1,070             939
Total assets                             148,998           148,806
LIABILITIES AND EQUITY
Current liabilities:
 Accounts payable                        2,566             2,207
 Notes payable                           861               884
 Accrued expenses and other current      11,047            13,134
 liabilities
 Dividend payable                        57                57
 Deferred revenue - current              6,470             6,542
 Income tax payable                      1,030             997
 Deferred tax liabilities - current      8,583             8,222
 Government subsidies - current          161               710
Total current liabilities                30,775            32,753
 Deferred revenue - non-current          176               135
 Government subsidies - non-current      5,865             4,946
Total liabilities                      36,816            37,834
EQUITY
China Digital TV Holding Co., Ltd. shareholders'

equity:
 Ordinary shares                         30                30
 Additional paid-in capital              32,483            32,037
 Statutory reserve                       17,907            17,907
 Retained earnings                       35,178            31,122
 Accumulated other comprehensive         25,908            28,940
 income
Total China Digital TV Holding Co.,
Ltd.                                     111,506           110,036

shareholders' equity
Noncontrolling interest                  676               936
Total equity                             112,182           110,972
TOTAL LIABILITIES AND EQUITY           $ 148,998       $   148,806

Reconciliation of Non-GAAP Measures

Non-GAAP net income attributable to holders of ordinary shares excludes
certain one-time 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
                                            March 31,  December31,  March 31,
                                            2014       2013          2013
                                            (in U.S. dollars, in thousands)
Net income attributable to holders of
ordinary                                    $  4,056   $   10,041    $  7,838
shares - GAAP
Share-based compensation expenses              278         338          956
Amortization of intangible assets from
business acquisitions and equity method        43          55           54
investments
Net income attributable to holders of
ordinary                                    $  4,377   $   10,434    $  8,848
shares - Non-GAAP



China Digital TV Holding Co., Ltd.
Unaudited Additional Information
(in thousands of U.S. dollars )
                                           For the three months ended
                                           March 31,  December 31, March 31,
                                           2014       2013         2013
Revenues:
CA                                         $ 18,331   $  25,728    $ 19,385
Others                                       241         528         829
Total revenues                               18,572      26,256      20,214
Business and sales related taxes:
CA                                           (387)       (330)       (272)
Others                                       (2)         (9)         (16)
Total business and sales relatedtaxes       (389)       (339)       (288)
Net revenues:
CA                                           17,944      25,398      19,113
Others                                       239         519         813
Total net revenues                           18,183      25,917      19,926
Cost of revenues:
CA                                           (3,662)     (5,123)     (4,380)
Others                                       (235)       (982)       (918)
Total cost of revenues                       (3,897)     (6,105)     (5,298)
Gross profit (loss):
CA                                           14,282      20,275      14,733
Others                                       4           (463)       (105)
Total gross profit (loss)                    14,286      19,812      14,628
Operating expenses:
Research and development expenses
CA                                           (1,926)     (1,972)     (1,983)
Others                                       (2,122)     (2,155)     (2,959)
Total research and development expenses      (4,048)     (4,127)     (4,942)
Selling and marketing expenses
CA                                           (1,675)     (1,917)     (1,682)
Others                                       (2,396)     (2,004)     (2,310)
Total selling and marketing expenses         (4,071)     (3,921)     (3,992)
General and administrative expenses
CA                                           (1,410)     (1,244)     (1,387)
Others                                       (975)       (861)       (1,881)
Total general and administrative expenses    (2,385)     (2,105)     (3,268)
Total operating expenses                     (10,504)    (10,153)    (12,202)
Income (loss)from operations:
CA                                           9,271       15,141      9,681
Others                                       (5,489)     (5,482)     (7,255)
Income from operations                     $ 3,782    $  9,659     $ 2,426

SOURCE China Digital TV Holding Co., Ltd.

Website: http://ir.chinadtv.cn
 
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