China Digital TV Reports Third Quarter 2007 Financial Results

China Digital TV Reports Third Quarter 2007 Financial Results

BEIJING, Nov. 15 /Xinhua-PRNewswire-FirstCall/ -- China Digital TV Holding Co., Ltd. (NYSE:STV) ("China Digital TV"), the leading provider of conditional access ("CA") systems to China's rapidly growing digital television market, announced today its unaudited financial results for the three months ended September 30, 2007.

   Highlights for Third Quarter 2007   -- Total revenue for the quarter was US$14.4 million, a 37.3% increase      from the third quarter of 2006 and a 28.9% increase from the second      quarter of 2007.   -- Net income for the quarter was US$8.8 million, a 53.0% increase from      the third quarter of 2006 and a 46.9% increase from the second quarter      of 2007.   -- Basic earnings per ADS (1 ADS represents 1 ordinary share) were US$0.20,      compared to US$0.10 in the third quarter of 2006, and US$0.14 in the      second quarter of 2007.   -- China Digital TV shipped 1.9 million smart cards during the quarter.   -- In the third quarter, China Digital TV entered into 18 new contracts to      install CA systems, including contracts with provincial-level cable      operators in Heilongjiang and Fujian, the municipal cable operator in      Heze, Shandong province, and several cable operators in the city of      Ningbo.   

"We are pleased with our results for the third quarter of 2007," said China Digital TV Chief Executive Officer Jianhua Zhu. "This quarter's strong performance reflects China Digital TV's leading market position in China's fast-developing digital television industry. With our established brand name, adaptable product solutions, consistently high-quality customer service and extensive industry partnerships, we are confident that we will maintain our leading market position and grow along with this dynamic industry."

Mason Xu, China Digital TV's Chief Financial Officer, added, "Our successful IPO last month on the New York Stock Exchange demonstrates the confidence of investors in China Digital TV's business model as well as in the tremendous potential of China's digital television industry. In the coming quarters, we hope to leverage our deep understanding of the local market, leading industry position and long-term commitment to R&D to capitalize further on this exciting growth."

Third Quarter 2007 Financial Results

(Note: Unless otherwise stated, all financial statement amounts used in this press release are based on US GAAP.)

For the third quarter of 2007, China Digital TV reported total revenues of US$14.4 million, a 37.3% increase from US$10.5 million in the same period of 2006, and a 28.9% increase from US$11.2 million in the second quarter of 2007. During the quarter, China Digital TV entered into 18 new contracts to install CA systems.

Revenues from smart cards and related products were US$12.8 million, a 40.1% increase from the same period of 2006 and a 26.6% increase from the second quarter. Smart card and related products sales were 88.7% of the total revenues for the quarter. China Digital TV shipped 1.9 million cards in the third quarter, 2007, a 32.9% increase over the number of cards shipped in the same period of 2006 and a 23.6% increase over the second quarter of 2007.

Revenues from services were US$1.6 million, a 19.0% increase over the same period in 2006 and a 49.6% increase over the second quarter, 2007. Service revenue was 11.3% of the total revenues for the quarter.

Gross profit for the quarter was US$12.0 million, a 45.1% increase from US$8.3 million in the same period of 2006 and a 34.0% increase over US$8.9 million in the second quarter of 2007. Gross margin was 83.4% for the third quarter, compared to 79.4% in the same period in 2006 and 80.3% in the second quarter of 2007. The year-over-year and quarter-over-quarter increases were primarily due to increased gross margin for system integration services for this quarter.

Operating expenses for the third quarter were US$2.6 million, a 123.0% increase from US$1.2 million in the same period of 2006 and an 11.6% increase from US$2.4 million in the second quarter of 2007.

   -- Research and development expenses for the quarter increased 136.4% to      US$1.2 million from US$0.5 million in the same period of 2006 and      increased 14.2% from US$1.1 million in the second quarter of 2007. The      increases were primarily due to higher average R&D headcount for the      quarter, which grew 61.9% from the same period of 2006 and 18.0% from      the second quarter of 2007.   -- Sales and marketing expenses for the quarter increased 58.5% to US$0.8      million from US$0.5 million in the same period of 2006 and 36.1% from      US$0.6 million in the second quarter of 2007.  The year-over-year and      quarter-over-quarter increases were primarily due to costs associated      with ongoing marketing and brand promotion activities.   -- General and administrative expenses for the quarter increased 308.9% to      US$0.6 million from US$0.1 million for the same period of 2006 and      decreased 13.7% from US$0.7 million in the second quarter of 2007. The      year-over-year increase was primarily due to an increase in personnel      costs and share-based compensation expenses. The quarter-over-quarter      decrease was primarily due to zero provision for doubtful receivables      in this quarter.  

Operating margin for the quarter was 64.9%, compared to 68.0% for the same period of last year and 58.9% for the second quarter of 2007.

Net income for the quarter was US$8.8 million, a 53.0% increase from US$5.7 million in the same period of 2006 and a 46.9% increase from US$6.0 million in the second quarter of 2007. Basic and diluted earnings per ADS for the quarter amounted to US$0.20 and US$0.19, respectively.

Non-GAAP net income for the quarter was US$9.2 million, a 57.3% increase from US$5.9 million in the same period of 2006 and a 41.8% increase from US$6.5 million in the second quarter of 2007.

Outlook for the fourth quarter ended December 31, 2007

Based on information available on November 16, 2007, China Digital TV expects its net revenues for the fourth quarter of 2007 to be in the range of US$15.5 million to US$17.5 million, representing year-over-year growth in the range of 61% to 82%.

Conference Call Information

China Digital TV's management will host an earnings conference call at 7 p.m. November 15, 2007 (U.S. Eastern Standard Time, or 8 a.m. on November 16, 2007 Beijing/Hong Kong time).

   Dial-in details for this conference call are as follows:    United States:     +1-617-224-4325   Hong Kong:    +852-3002-1672   

Please dial-in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode for all regions is "China Digital TV Earnings Call."

Additionally, 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/ .

A replay may be accessed by phone at the following number until December 14, 2007:

   United States:     +1-888-286-8010   International:     +1-617-801-6888   Passcode:          83073359    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 2007 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. China Digital TV may also make written or oral forward-looking statements in its periodic reports to 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 those 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 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 registration statement on Form F-1 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 the leading provider of conditional access ("CA") systems to China's rapidly growing 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 subsidiary, Beijing Super TV Co., Ltd., and its affiliate, Beijing Novel-Tongfang Digital TV Technology Co., Ltd.

For more information please visit the Investor Relations section of China Digital TV's website at http://ir.chinadtv.cn/ .

                     China Digital TV Holding Co., Ltd.              Unaudited Consolidated Statements of Operations                             (in U.S. dollars)                                               For the three months ended                                           September               September                                              30,      June 30,       30,                                             2007        2007        2006   Revenues:     Products                             12,784,867  10,094,845   9,125,783     Services                              1,633,471   1,092,057   1,372,259   Total revenues                         14,418,338  11,186,902  10,498,042     Business taxes                          (61,292)    (57,393)   (110,045)   Net revenue                            14,357,046  11,129,509  10,387,997   Cost of Revenues:     Products                             (1,803,858) (1,487,442) (1,369,239)     Services                               (580,362)   (709,499)   (765,638)   Total Cost of Revenues                 (2,384,220) (2,196,941) (2,134,877)   Gross Profit                           11,972,826   8,932,568   8,253,120   Operating expenses:     Research and development expenses    (1,201,355) (1,052,015)   (508,242)     Sales and marketing expenses           (842,925)   (619,460)   (531,780)     General and administrative expenses    (605,503)   (701,894)   (148,074)   Total Operating Expense                (2,649,783) (2,373,369) (1,188,096)    Income from operation                   9,323,043   6,559,199   7,065,024     Interest income                         145,805      62,517      83,605     Recognition of change in the fair      value of warrants                           --          --  (1,351,594)   Income before income tax                9,468,848   6,621,716   5,797,035   Income tax expense - current             (726,734)   (659,319)         --   Income tax benefit - deferred              41,044      15,560      25,582   Net income before minority interest     8,783,158   5,977,957   5,822,617    Minority interest                             --          --     (82,935)   Net income                              8,783,158   5,977,957   5,739,682    EPS - Basic ordinary shares                  0.20        0.14        0.10   EPS - Basic preferred shares                 0.20        0.14        0.24   EPS - Diluted ordinary shares                0.19        0.13        0.09                        China Digital TV Holding Co., Ltd.                   Unaudited Consolidated Balance Sheets                             (in U.S. dollars)                                           September                December                                             30,      June 30,        31,                                            2007        2007         2006   Current assets:      Cash and cash equivalents          25,926,100  16,365,704   21,137,216      Restricted cash                            --      52,729       51,238      Accounts receivable                 8,424,822   6,343,752    2,862,276      Inventories, net                    4,559,108   4,224,011    2,759,209      Prepaid expenses and other current       assets                             1,888,440   1,267,525    1,349,195      Amounts due from related parties    1,427,358   1,594,899    1,668,036      Deferred costs-current                511,184     531,955      580,157      Deferred income taxes - current        72,623      67,262       62,864   Total current assets                  42,809,635  30,447,837   30,470,191      Property and equipment, net         1,035,465     901,654      537,515      Intangible assets, net              1,067,266   1,169,850    1,464,389      Goodwill                              453,498     447,262      432,422      Long-term investment                  402,029     105,049           --      Deferred costs - non-current          396,377     426,828      600,357      Deferred income tax - non-current      16,563          --           --   TOTAL ASSETS                          46,180,833  33,498,480   33,504,874   Current liabilities:      Accounts payable                      430,671     368,424      884,798      Accrued expenses and other current       liabilities                        1,480,474   1,212,883    1,360,456      Deferred revenue-current            7,774,937   5,089,032    6,899,521      Dividend payable                           --          --   11,300,000      Income tax payable                    850,241     728,466           --   Total current liabilities             10,536,323   7,398,805   20,444,775      Deferred revenue - non-current        886,667     798,479    1,079,493      Deferred income taxes -       non-current                               --      20,799       39,739   Total Liabilities                     11,422,990   8,218,083   21,564,007      Minority interest                   4,000,000   4,000,000    4,000,000      Series A convertible redeemable       preferred shares                  16,078,197  16,078,197   16,078,197   Shareholders' equity/(deficiency):      Ordinary shares                        17,000      17,000       17,000      Additional paid-in capital          5,917,571   5,574,138    4,887,267      Statutory reserve                   2,353,373   2,353,373    2,353,373      Retained earnings / (accumulated       deficit)                           4,808,874  (3,974,284) (16,136,820)      Accumulated other comprehensive       income                             1,582,828   1,231,973      741,850   Total shareholders'    equity/(deficiency)                  14,679,646   5,202,200   (8,137,330)   TOTAL LIABILITIES, MINORITY INTEREST,    SERIES A CONVERTIBLE REDEEMABLE    PREFERRED SHARES AND SHAREHOLDERS'    EQUITY/(DEFICIENCY)                  46,180,833  33,498,480   33,504,874                        China Digital TV Holding Co., Ltd.                     Reconciliation of Non-GAAP Results                             (in U.S. dollars)                                     For the three months ended                                           September               September                                              30,       June 30,      30,                                             2007        2007        2006    GAAP Net Income                         8,783,158   5,977,957   5,739,682       Non-cash share-based compensation     343,433     378,157      31,466       Amortization of intangible assets     118,041     164,530     105,792   Non-GAAP Net Income                     9,244,632   6,520,644   5,876,940      For investor and media inquiries, please contact:     In China:     Helen Wu     Senior Manager of Investor Relations     Tel:   +86-10 8279-0021     Email: ir@chinadtv.cn      Helen Plummer     Ogilvy Public Relations Worldwide (Beijing)     Tel:  +86-10 8520-3090     Email: helen.plummer@ogilvy.com     In the United States:     Jessica Cohen     Ogilvy Public Relations Worldwide (New York)     Tel:   +1-646-460-9989     Email: jessica.cohen@ogilvy.com  

Source: China Digital TV Holding Co., Ltd.

CONTACT: In China - Helen Wu, Senior Manager of Investor Relations, +86-
10-8279-0021, or ir@chinadtv.cn; or Helen Plummer of Ogilvy Public Relations
Worldwide (Beijing), +86-10-8520-3090, or helen.plummer@ogilvy.com; or In the
United States - Jessica Cohen of Ogilvy Public Relations Worldwide (New York),
+1-646-460-9989, or jessica.cohen@ogilvy.com, both for China Digital TV
Holding Co., Ltd.

Web Site: http://ir.chinadtv.cn/

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Profile: International Entertainment