China Digital TV Announces Unaudited Second Quarter 2016 Results
BEIJING, Aug. 16, 2016 /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 second quarter ended June 30, 2016 and six months period ended June 30, 2016.
"We are pleased to report the continuous adoption and solid development of our cloud business, as rapid user growth provided us strong confidence in our strategies to monetize our cloud-based offerings going forward," stated Mr. Jianhua Zhu, China Digital TV's chief executive officer. "During the second quarter of 2016, total registered users on our cloud platform expanded by 52% quarter over quarter to 3.5 million and gives us increasing confidence in the demand for our services and sustainability of this growth momentum over the coming quarters. With Beijing and Chongqing customers already contributing to steady revenue growth, we expect more revenue contributing customers, including those in Tianjin and Sichuan Province, to roll out our cloud platforms in the second half of the year. Despite the challenging environment for our traditional businesses, we are confident in our strategy to evolve with China's increasingly diverse cable environment and the opportunities and potential offered by our cloud platform services as we strive to further enhance the content offerings, which is currently limited to TV-based games, to areas such as education, entertainment and online shopping. In addition, in an effort to address the demands of our cable operating customer base, we continue to prepare for the exciting virtual reality ("VR") opportunities which have the potential to re-shape our viewing and entertainment experiences within the home. We have already begun a partnership on the content creation side and have witnessed some early stage success. With that in mind, we remain fully committed to establishing ourselves as a leading provider and gateway of cloud-based entertainment content into the living rooms throughout China."
Mr. Zhenwen Liang, China Digital TV's chief financial officer, commented, "During the second quarter of 2016, our business performance came in-line with our expectations. However the challenges for the traditional smartcard business persist as average selling prices ("ASP") continued on the downward trend even though volumes grew. We remain cautious on our traditional businesses as the Chinese market has become saturated while our overseas business slowly expands. In the meantime, as we prepare for next-generation content services, such as gaming and VR enabled content, we are excited and confident in the growth opportunities ahead of us."
Second Quarter 2016 Results(([1]))
In the second quarter of 2016, China Digital TV's smart card shipments increased by 3.8% to 2.19 million from 2.11 million in the prior year period, primarily driven by increased shipments to international markets, but partially offset by a decline in domestic shipments due to the overall maturity of the CA business.
China Digital TV's net revenues remained relatively stable at 10.4 million compared to the prior year period. Revenues from other services and other products increased, but were partially offset by a decrease in revenues from smart card revenues.
Revenues from the Company's top five customers accounted for 37.3% of total revenues, compared to 37.0% in the prior year period.
Revenue Breakdown
For the three months ended
--------------------------
June 30, March 31, June 30,
2016 2016 2015
---- ---- ----
(in thousands of U.S. dollars)
-----------------------------
Products:
Smart
cards $7,183 $10,071 $8,906
Other
products 1,608 928 428
Subtotal 8,791 10,999 9,334
----- ------ -----
Services:
Head-
end
system
integration 360 882 504
Head-
end
system
development 510 701 345
Licensing
income 92 192 198
Royalty
income 3 14 144
Other
services 725 400 13
Subtotal 1,690 2,189 1,204
----- ----- -----
Total
revenues $10,481 $13,188 $10,538
======= ======= =======
Revenues from smart cards decreased by 19.3% to US$7.2 million in the second quarter of 2016 from US$8.9 million in the prior year period, primarily due to a decline in ASPs. Sales of smart cards accounted for 68.5% of total revenues in the second quarter of 2016, compared to 84.5% in the prior year period.
Revenues from other products increased by 275.7% to US$1.6 million in the second quarter of 2016 from US$0.4 million in the prior year period. The increase was mainly attributable to an increase in sales of set-top-boxes with pre-installed smart cards, as well as an increase in digital rights management ("DRM") sales. Sales of other products accounted for 15.3% of total revenues in the second quarter of 2016, compared to 4.1% in the prior year period.
Revenues from services increased by 40.4% to US$1.7 million in the second quarter of 2016 from US$1.2 million in the prior year period. The increase was primarily due to an increase in other services, such as the expansion and monetization of the Company's emerging cloud platform. Revenues from services accounted for 16.1% of total revenues in the second quarter of 2016, compared to 11.4% in the prior year period.
Cost of revenues from smart cards and other products increased by 13.8% to US$2.2 million in the second quarter of 2016 from US$2.0 million in the prior year period. The increase was mainly due to an increase in cost of revenues from other products, and was partially offset by a decline in cost of revenues from smart cards. Cost of revenues from smart cards and other products accounted for 37.6% and 26.4%, respectively, of total cost of revenues in the second quarter of 2016, compared to 55.8% and 10.2% in the prior year period.
Cost of revenues from services in the second quarter of 2016 increased by 24.1% to US$1.3 million in the second quarter of 2016 from US$1.0 million in the prior year period. The increase was mainly due to an increase in cost of revenues that was associated with the expansion of the cloud computing business. Cost of revenues from services accounted for 36.0% of total cost of revenues in the second quarter of 2016, compared to 34.0% in the prior year period.
Gross profit in the second quarter of 2016 decreased by 7.0% to US$6.9 million from US$7.5 million in the prior year period. Gross margin, was 66.7% in the second quarter of 2016, compared to 71.6% in the prior year period. The decline in gross margin was primarily due to the decreased portion of total revenues accounted for by net revenues from smart cards, which have a higher gross margin than other products and services. In the second quarter of 2016, the ASP of smart cards decreased by 22.2% year over year, while the unit cost of smart cards decreased by 23.9% year over year.
Operating expenses in the second quarter of 2016 increased by 40.0% to US$11.5 million from US$8.2 million in the prior year period. The increase was mainly due to an increase in shared-based compensation.
In May 2016, certain key employees made a cash investment to Beijing Super TV Co., Ltd. ("Super TV"), a PRC operating subsidiary of the Company, in return for a 9.91% of the outstanding equity interest in Super TV. The fair value of the equity interest purchased by the employees was higher than the cash they paid, hence the difference between fair value and the cash consideration was recognized as share based compensation expenses in the second quarter.
-- Research and development expenses in the second quarter of 2016
increased by 7.6% to US$4.1 million from US$3.8 million in the prior
year period.
-- Selling and marketing expenses in the second quarter of 2016 increased
by 29.0% to US$3.3 million from US$2.6 million in the prior year period.
-- General and administrative expenses in the second quarter of 2016
increased by 122.3% to US$4.1 million from US$1.8 million in the prior
year period.
Lossfrom operations in the second quarter of 2016 was US$4.6 million, as compared to loss from operations of US$0.8 million in the prior year period.
Income tax benefits in the second quarter of 2016 was US$1.9 million, as compared to an income tax expenses of US$0.9 million in the prior year period. The increase in the income tax benefits was primarily due to the tax rate adjustment. In the second quarter of 2016, the Company assessed its PRC operating subsidiary, Super TV, qualified as a "key software enterprise" for the tax year of 2015 based on the annual tax filing made in May 2016. As a result, the Company was entitled to a preferential income tax rate of 10% on its income tax filing for the year of 2015. Because the Company recognized income tax expenses at the rate of 15% in 2015 taking into consideration of the uncertainty as to whether Super TV could qualify, the income tax expenses previously recognized were partially reversed in the second quarter.
Net lossattributable to holders of ordinary shares in the second quarter of 2016 was US$1.6 million, as compared to a net loss attributable to holders of ordinary shares of US$0.7 million in the prior year period.
Non-GAAPnet income(([2])) attributable to holders of ordinary shares in the second quarter of 2016 was US$2.4 million, as compared to a non-GAAP net loss attributable to holders of ordinary shares of US$0.6 million in the prior year period(([3])).
Balance Sheet
As of June 30, 2016, China Digital TV had cash and cash equivalents and restricted cash totaling US$76.1 million.
Business Outlook
Based on information available as of August 16, 2016, China Digital TV expects smart card shipment volumes in the third quarter of 2016 to be in the range of 2.2 million to 2.5 million. Net revenues in the third quarter of 2016 are expected to be in the range of US$8.5 million to US$9.5 million.
Conference Call Information
China Digital TV's management will host an earnings conference call at 8:00 p.m. on Tuesday, August 16, 2016, U.S. Eastern Time (8:00 a.m. on Wednesday, August 17, 2016, 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
Conference Name: China Digital TV
Holding Co. Ltd.
call.
A replay of the call will be available for one week between 10:00 p.m. on August 16, 2016 and 10:00 a.m. on August 23, 2016, U.S. Eastern Time.
Replay Dial-in Information:
United States: +1-877-344-7529
International: +1-412-317-0088
Replay Access Code: 10090775
Additionally, a live and archived webcast of this call will be available on the Investor Relations section of China Digital TV's corporate website at
http://ir.chinadtv.cn.
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.
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 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.
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.
Violet Gu
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 (loss) is
defined as net income (loss)
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 (Loss)
(in thousands of U.S. dollars, except share and per share data)
For the three months ended
--------------------------
June 30, March 31, June 30,
2016 2016 2015
---- ---- ----
Revenues:
Products $8,791 $10,999 $9,334
Services 1,690 2,189 1,204
----- ----- -----
Total revenues 10,481 13,188 10,538
Business and related taxes (70) (167) (120)
--- ---- ----
Net revenues 10,411 13,021 10,418
Cost of revenues:
Products (2,222) (2,255) (1,953)
Services (1,250) (1,043) (1,007)
------ ------ ------
Total cost of revenues (3,472) (3,298) (2,960)
Gross profit 6,939 9,723 7,458
Operating expenses:
Research and development expenses (4,106) (3,447) (3,816)
Selling and marketing expenses (3,301) (2,410) (2,558)
General and administrative expenses (4,100) (1,988) (1,844)
------ ------ ------
Total operating expenses (11,507) (7,845) (8,218)
(Loss)/Income from operations (4,568) 1,878 (760)
Interest income 295 337 282
Gain from disposal of an equity method 95 - -
investment
Other income, net 524 167 486
(Loss)/Income before income tax expenses (3,654) 2,382 8
Income tax benefits /(expenses) 1,865 (1,282) (904)
----- ------ ----
Net (loss)/income before share of income /(loss) (1,789) 1,100 (896)
on equity method investments
Share of income/(loss) on equity method
investments, net of income taxes 30 10 (42)
Net (loss)/income (1,759) 1,110 (938)
Net loss attributable to noncontrolling interest 140 49 281
Net (loss)/income attributable to holders of $(1,619) $1,159 $(657)
ordinary shares
Net income/(loss) per share attributable to
holders of ordinary shares
Basic $(0.03) $0.02 $(0.01)
====== ===== ======
Diluted $(0.03) $0.02 $(0.01)
====== ===== ======
Net (loss)/income $(1,759) $1,110 $(938)
Other comprehensive (loss)/income, net of
income taxes
(3,085) 566 (46)
Foreign currency translation adjustment
1,676 (984)
Comprehensive (loss)/income (4,844)
Comprehensive loss attributable to
noncontrolling interest 230 37 291
--- --- ---
Comprehensive (loss)/income attributable to
$
holders of ordinary shares (4,614) $1,713 (693)
$
===
Weighted average shares used in calculating
net income per ordinary share
Basic 60,190,497 60,177,208 59,847,896
========== ========== ==========
Diluted 60,190,497 60,576,380 59,847,896
========== ========== ==========
China Digital TV Holding Co., Ltd.
Unaudited Condensed Consolidated Balance Sheets
(in thousands of U.S. dollars)
ASSETS June 30, December 31,
2016 2015
---- ----
Current assets:
$76,040 $70,138
Cash and cash equivalents
33 34
Restricted cash
3,368 4,851
Notes receivable
37,275 38,211
Accounts receivable, net
4,164 4,857
Inventories
3,944 3,782
Prepaid expenses and other current assets
Total current assets 124,824 121,873
753 680
Property and equipment, net
304 348
Intangible assets, net
1,309 1,343
Goodwill
2,601 3,055
Equity method investments
3,208 3,451
Deferred income tax assets
Total assets 132,999 130,750
======= =======
LIABILITIES AND EQUITY
Current liabilities:
1,709 1,665
Accounts payable
9,081 11,806
Accrued expenses and other current liabilities
12,038 -
Dividend payable
3,673 3,635
Deferred revenue - current
4,495 2,401
Income tax payable
797 819
Government subsidies - current
Total current liabilities 31,793 20,326
- 173
Deferred revenue - non-current
2,550 3,024
Government subsidies - non-current
1,274 5,421
Deferred income taxes liabilities
Total liabilities 35,617 28,944
EQUITY
China Digital TV Holding Co., Ltd. shareholders'
equity:
30 30
Ordinary shares
41,490 37,988
Additional paid-in capital
18,361 18,361
Statutory reserve
10,953 23,451
Retained earnings
19,209 21,650
Accumulated other comprehensive income
Total China Digital TV Holding Co., Ltd.
90,043 101,480
shareholders' equity
Noncontrolling interest 7,339 326
----- ---
Total equity 97,382 101,806
------ -------
TOTAL LIABILITIES AND EQUITY $132,999 $130,750
======== ========
Unaudited Condensed Consolidated Statements of Comprehensive Income
(in thousands of U.S. dollars, except share and per share data )
For the Six Months Ended
------------------------
June 30, June 30,
2016 2015
---- ----
Revenues:
Products $19,790 $22,549
Services 3,879 2,347
----- -----
Total revenues 23,669 24,896
Business and sales related taxes (237) (429)
---- ----
Net revenues 23,432 24,467
Cost of revenues:
Products (4,477) (4,151)
Services (2,293) (2,020)
------ ------
Total Cost of Revenues (6,770) (6,171)
Gross Profit 16,662 18,296
Operating expenses:
Research and development expenses (7,553) (7,709)
Selling and marketing expenses (5,711) (6,064)
General and administrative expenses (6,088) (4,062)
------ ------
Total operating expenses (19,352) (17,835)
(Loss)/Income from operations (2,690) 461
Interest income 632 533
Gain from disposal of an equity method 95 -
investment
Other income 691 550
--- ---
(Loss)/Income before income taxes (1,272) 1,544
Income tax benefits/(expenses) 583 (2,346)
Net loss before net income from equity (689) (802)
method investments
Net income/(loss) from equity method 40 (60)
investments, net of income taxes
Net loss (649) (862)
Net loss attributable to noncontrolling interest 189 568
--- ---
Net loss attributable to holders of ordinary $(460) $(294)
shares
Net loss per share attributable to holders of
ordinary shares
Basic $(0.01) $(0.005)
====== =======
Diluted $(0.01) $(0.005)
====== =======
Net loss $(649) $(862)
Other comprehensive (loss)/income, net of tax
Foreign currency translation adjustment (2,519) 212
------ ---
Comprehensive loss (3,168) (650)
Comprehensive loss attributable to 267 580
noncontrolling interest
Comprehensive loss attributable to holders $(2,901) $(70)
of ordinary shares
Weighted average shares used in calculating
net income per ordinary share
Basic 60,183,853 59,786,750
========== ==========
Diluted 60,183,853 59,786,750
========== ==========
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.
However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP. ((
))
For the three months ended
--------------------------
June 30, March 31, June 30,
2016 2016 2015
---- ---- ----
(in U.S. dollars, in thousands)
Net
(loss)/income
attributable
to China
Digital
TV $(1,619) $1,159 $(657)
Holding
Co., Ltd
shareholders
-GAAP
Share-
based
compensation
expenses 3,988 10 30
Amortization
of
intangible
assets
from
business 12 12 51
acquisitions
and
equity
method
investments
Net
income/
(loss)
attributable
to China
Digital
TV $2,381 $1,181 $(576)
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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Profile: intent
