China Digital TV Announces Unaudited First Quarter 2015 Results

China Digital TV Announces Unaudited First Quarter 2015 Results

BEIJING, June 8, 2015 /PRNewswire/ -- China Digital TV Holding Co., Ltd. (NYSE: STV) ("China Digital TV" or the "Company"), the leading provider of cloud-based application platforms and conditional access ("CA") systems which enable China's digital cable television market to offer and secure diversified content services, today announced its unaudited financial results for the first quarter ended March 31, 2015.

"During the first quarter, we made further progress in our evolution from being China's leading access technology provider to the cable TV market, to being a first-mover as a diversified digital TV service provider to cable operators, increasing the prevalence of cable programming outside the home and mobile applications inside the home," said Dr. Zengxiang Lu, China Digital TV's acting chief executive officer. "As was expected, revenue came in soft due to the ongoing market decline of the conditional access business and negative impact of seasonality in the first quarter. Despite these headwinds, we maintain our market dominance in this segment with a market share of over 50% and key relationships with nearly all of China's cable operators."

Dr. Lu continued, "We believe that our leading position in this mature sector will pave the way for future success in the emerging frontier of providing cloud-based content programming for cable operators, helping them realize new streams of revenue. We continued to expand our cloud cooperation with Beijing Gehua CATV Network to 1,400 streams, and are happy to report that we currently have 300,000 registered users for cloud services under this partnership and expect to double that figure by year-end. Furthermore, we inked an agreement with the city of Zibo in Shandong province to deploy our cloud platform, and continue to explore other municipal and provincial partnerships to expand our cloud services into new regions."

Ms. Yue Qian, China Digital TV's acting chief financial officer, commented, "As our business continues to transform, it will take several quarters before our investment in these new frontiers achieves significant returns. Understandably revenues were soft due to the market maturity in the traditional segment and the still nascent state of our cloud platform segment. However, this short-term volatility should not dilute the key message that in front of us lays a tremendous market opportunity and we are uniquely well-positioned to leverage our existing capabilities and platform to take advantage of these new emerging growth avenues."







First Quarter 2015 Results(([1]))

In the first quarter of 2015, China Digital TV's smart card shipments decreased by 17.1% to approximately 2.95 million from 3.56 million in the prior year period.

In the first quarter of 2015, China Digital TV's net revenues decreased by 22.7% to US$14.0 million from US$18.2 million in the prior year period. The decrease was primarily due to decreases in revenues from the sales of smart cards and other products caused by the general market decline of the mature CA business.



In the first quarter of 2015, revenues from the Company's top five customers accounted for 28.4% of total revenues, as compared to 25.0% in the prior year period.

Revenue Breakdown



For the three months ended
--------------------------

March 31, December 31, March 31,

2015 2014 2014
---- ---- ----

(in U.S. dollars, in thousands)
------------------------------

Products:

Smart cards $12,839 $22,145 $15,591

Other products 376 2,354 1,556

Subtotal 13,215 24,499 17,147
------ ------ ------

Services:

Head-end system
integration 596 3,210 413

Head-end system
development 318 737 271

Licensing income 100 1,155 311

Royalty income 123 152 303

Other services 6 11 127

Subtotal 1,143 5,265 1,425
----- ----- -----

Total revenues $14,358 $29,764 $18,572
======= ======= =======
Revenues from smart cards decreased by 17.7% to US$12.8 million in the first quarter of 2015 from US$15.6 million in the prior year period. The decrease was mainly due to a decrease in shipment volumes of smart cards. Sales of smart cards accounted for 89.4% of total revenues in the first quarter of 2015, as compared to 83.9% in the prior year period.



Revenues from other products decreased by 75.8% to US$0.4 million in the first quarter of 2015 from US$1.6 million in the prior year period. The decrease was mainly attributable to lower sales of surface mounted chips. Sales of other products accounted for 2.6% of total revenues in the first quarter of 2015, as compared to 8.4% in the prior year period.

Revenues from services decreased by 19.8% to US$1.1 million in the first quarter of 2015 from US$1.4 million in the prior year period. The decrease was primarily due to the decline in licensing and royalty income, which was partially offset by an increase in head-end system integration. Revenues from services accounted for 8.0% of total revenues in the first quarter of 2015, as compared to 7.7% in the prior year period.



Cost of revenues from smart cards and other products decreased by 22.3% to US$2.2 million in the first quarter of 2015 from US$2.8 million in the prior year period. The decrease was mainly due to a decline in cost of revenues from smart cards resulting from decreased shipment volumes of smart cards. Cost of revenues from smart cards and other products accounted for 65.0% and 3.4% of total cost of revenues, as compared to 66.0% and 6.6% in the prior year period.



Cost of revenues from services decreased by 5.1% to US$1.0 million in the first quarter of 2015 from US$1.1 million in the prior year period. The decrease was mainly due to a decline in revenues from services. Cost of revenues from services accounted for 31.5% of total cost of revenues, as compared to 27.4% in the prior year period.



Gross profit in the first quarter of 2015 decreased by 24.1% to US$10.8 million from US$14.3 million in the prior year period. Gross margin, which is equal to gross profit divided by net revenues, was 77.1% in the first quarter of 2015, as compared to 78.6% in the prior year period. The decline in gross margin was primarily due to a decrease in revenues from other products, such as surface mounted chips, which carry a relatively high gross margin.

In the first quarter of 2015, the average selling price of smart cards decreased by 1.1%, as compared to the prior year period. In addition, the unit cost of smart cards decreased by 2.0%, as compared to the prior year period.

Operating expenses in the first quarter of 2015 decreased by 8.4% to US$9.6 million from US$10.5 million in the prior year period.


-- Research and development expenses in the first quarter of 2015 decreased
by 3.8% to US$3.9 million from US$4.0 million in the prior year period.
The decrease was primarily due to decreases in personnel related
expenses resulting from lower headcount.
-- Selling and marketing expenses in the first quarter of 2015 decreased by
13.9% to US$3.5 million from US$4.1 million in the prior year period.
The decline was mainly due to a decrease in marketing activities
relating to the Company's CA business.



-- General and administrative expenses in the first quarter of 2015
decreased by 7.0% to US$2.2 million from US$2.4 million in the prior
year period. The decrease was mainly due to decreased share-based
compensation expenses.


Income from operations in the first quarter of 2015 decreased by 67.7% to US$1.2 million from US$3.8 million in the prior year period. Operating margin, which is equal to operating income divided by net revenues, in the first quarter of 2015 was 8.7%, as compared to 20.8% in the prior year period.

Income tax expenses in the first quarter of 2015 increased by 56.7% to US$1.4 million from US$0.9 million in income tax expense in the prior year period. The increase was mainly due to the increase in accrued income tax expenses resulting from Beijing Super TV Co., Ltd., ("Super TV"), one of the Company's PRC operating subsidiaries, being taxed at a higher tax rate of 15% in the first quarter of 2015. Previously, Super TV was designated as a "key software enterprise" for the tax years of 2013 and 2014 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.



Net income attributable to holders of ordinary shares in the first quarter of 2015 decreased by 91.1% to US$0.4 million from US$4.1 million in the prior year period. Net margin, which is equal to net income divided by net revenues, in the first quarter of 2015 was 2.6%, as compared to 22.3% in the prior year period.

Non-GAAP net income attributable to holders of ordinary shares(([2])) in the first quarter of 2015 decreased by 89.7% to US$0.4 million from US$4.4 million in the prior year period(([3])).

Balance Sheet and Cash Flow

As of March 31, 2015, China Digital TV had cash and cash equivalents and restricted cash totaling US$61.3 million. In the first quarter of 2015, cash flow used in operations was approximately US$3.5 million.



Business Outlook

Based on information available as of June 8, 2015, China Digital TV expects smart card shipment volumes in the second quarter of 2015 to be in the range of 2.1 million to 2.4 million. Net revenues in the second quarter of 2015 are expected to be in the range of US$8.77 million to US$9.93 million.



Conference Call Information

The Company will hold an earnings conference call at 8:00 p.m. on Monday, June 8, 2015, U.S. Eastern Time (8:00 a.m. on Tuesday, June 9, 2015, Beijing/Hong Kong Time).

Conference Call Dial-in Information



United States Toll Free: + 1-888-346-8982

International: + 1-412-902-4272

Hong Kong: 800-905945

China Toll Free: 4001-201203

Passcode: China Digital TV Holding Co.
Ltd. 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 10:00 p.m. on June 8, 2015 and 10:00 a.m. on June 15, 2015 U.S. Eastern Time.

Replay Information



United States: +1-877-344-7529

International: + 1-412-317-0088


Passcode: 10066779
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 Statement

This announcement contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States 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 2015 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 enables television network operators to manage, extend and diversify content services across households and public areas in China. China Digital TV is the leading provider of cloud-based application platforms and network broadcasting platform ("NBP") services to Chinese cable operators, helping them to effectively bring mobile gaming apps and other entertainment options to household television sets, and extend cable programming outside the home to any mobile device. China Digital TV is also the leading provider of Conditional Access ("CA") systems in China's digital television market. CA systems enable television network operators to secure the delivery of content to their subscribers. The Company has existing cooperation with nearly all of China's cable television operators.

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



For investor and media inquiries, please contact:

China Digital TV Holding Co., Ltd.

Nan Hao

Investor Relations Manager

Tel: +86-10-6297-1199 x 9780

Email: ir@chinadtv.cn



ICR, Inc.

Charles Eveslage

Tel: +1 (646) 328-1950

Email: stv@icrinc.com



[1] 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").

[2] Non-GAAP net income attributable
to holders of ordinary shares is
defined as net income excluding
certain non-cash expenses, such as
share-based compensation expenses,
amortization of acquired intangible
assets from business acquisitions
and equity method investments.

[3] 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.








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, December 31, March 31,

2015 2014 2014
---- ---- ----


Revenues:

Products $13,215 $24,499 $17,147

Services 1,143 5,265 1,425
----- ----- -----

Total revenues 14,358 29,764 18,572

Business and sales related taxes (309) (537) (389)
---- ---- ----

Net revenues 14,049 29,227 18,183


Cost of revenues:

Products (2,198) (4,083) (2,830)

Services (1,013) (1,507) (1,067)
------ ------ ------

Total cost of revenues (3,211) (5,590) (3,897)

Gross profit 10,838 23,637 14,286


Operating expenses:

Research and development expenses (3,893) (4,430) (4,048)

Selling and marketing expenses (3,506) (3,188) (4,071)

General and administrative expenses (2,218) (4,169) (2,385)
------ ------ ------

Total operating expenses (9,617) (11,787) (10,504)


Income from operations 1,221 11,850 3,782


Interest income 251 151 706

Other income 64 1,930 268
--- ----- ---

Income before income taxes 1,536 13,931 4,756

Income tax expenses

Income tax-current (1,049) (1,545) (590)

Income tax-deferred (393) (2,054) (330)
---- ------ ----

Net income before net income from equity
method investments

94 10,332 3,836

Net loss from equity method investments, (18) (70) (22)
net of income taxes

Net income 76 10,262 3,814

Net loss attributable to noncontrolling interest 287 675 242
--- ---

Net income attributable to holders of ordinary shares $ $ $
=== === ===

363 10,937 4,056
=== ====== =====


Net income per share attributable to holders of ordinary shares

Basic $0.01 $0.18 $0.07
===== ===== =====

Diluted $0.01 $0.18 $0.07
===== ===== =====



Net income $76 $10,262 $3,814

Other comprehensive (loss)/income, net of tax

Foreign currency translation adjustment 258 (1,050) (3,053)
--- ------ ------

Comprehensive income 334 9,212 761

Comprehensive loss attributable to 289 684 263
noncontrolling interest



Comprehensive income attributable to holders $623 $9,896 $1,024
of ordinary shares




Weighted average shares used in calculating net income per ordinary share

Basic 59,724,925 59,592,861 59,178,936
========== ========== ==========

Diluted 62,111,962 62,221,519 60,390,688
========== ========== ==========









China Digital TV Holding Co., Ltd.

Unaudited Condensed Consolidated Balance Sheets

(in thousands of U.S. dollars)


ASSETS March 31, December 31,

2015 2014
---- ----

Current assets:

Cash and cash
equivalents $61,198 $62,042

Restricted cash 67 78

Notes
receivable 4,598 5,417

Accounts
receivable,
net 47,660 47,977

Inventories,
net 5,240 4,966

Prepaid
expenses and
other current
assets 5,384 8,964

Deferred costs-
current 812 710

Deferred tax
assets -
current 2,676 2,387


Total current assets 127,635 132,541

Long-term
receivable 45 45

Property and
equipment, net 757 880

Intangible
assets, net 421 440

Goodwill 1,403 1,402

Equity method
investments 2,486 2,502

Deferred costs
- non-
current 636 516

Deferred tax
assets - non-
current 786 785


Total assets 134,169 139,111
======= =======


LIABILITIES AND EQUITY

Current liabilities:

Accounts
payable 1,542 2,298

Notes payable 32 86

Accrued
expenses and
other current
liabilities 13,975 17,652

Deferred
revenue -
current 5,112 4,572

Income tax
payable 1,041 3,465

Deferred tax
liabilities -
current 4,411 3,727

Government
subsidies -
current 168 167


Total current liabilities 26,281 31,967

Deferred
revenue -
non-current 911 617

Government
subsidies -
non-current 4,410 4,390

Deferred income
taxes-non-
current 105 110


Total liabilities 31,707 37,084


EQUITY

China Digital TV Holding Co., Ltd. shareholders'

equity:

Ordinary shares 30 30

Additional
paid-in
capital 35,739 35,639

Statutory
reserve 17,977 17,977

Retained
earnings 22,670 22,307

Accumulated
other
comprehensive
income 25,769 25,509


Total China Digital TV Holding Co., Ltd. 102,185 101,462
------- -------

shareholders' equity

Noncontrolling interest 277 565
--- ---

Total equity 102,462 102,027
------- -------

TOTAL LIABILITIES AND EQUITY $134,169 $139,111
======== ========


Reconciliation of Non-GAAP Measures

Non-GAAP net income attributable to holders of ordinary shares excludes certain 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 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, December 31 March 31,

2015 2014 2014
---- ---- ----

(in U.S. dollars, in thousands)

Net income attributable to China Digital TV $363 $10,937 $4,056
Holding Co., Ltd shareholders - GAAP


Share-based compensation expenses 34 78 278


Amortization of intangible assets from business 52 52 43
acquisitions and equity method investments


Net income attributable to China Digital TV $449 $11,067 $4,377
Holding Co., Ltd shareholders - Non-GAAP
SOURCE China Digital TV Holding Co., Ltd.

China Digital TV Holding Co., Ltd.

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


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