BEIJING, May 11 /PRNewswire-Asia/ -- China Digital TV Holding Co., Ltd. ("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 first quarter ended March 31, 2010.
Highlights for First Quarter 2010 -- Net revenues in the first quarter of 2010 were US$14.0 million, above the high-end of the Company's guidance, and representing a 2.1% decrease from the first quarter in 2009 and a 2.5% increase from the fourth quarter of 2009. -- China Digital TV shipped approximately 2.57 million smart cards during the first quarter of 2010, which was above the high-end of the Company's guidance. -- According to market data collected by the Company, China Digital TV entered into 7 out of a total of 10 new contracts to install CA systems in China in the first quarter of 2010. -- Gross margin in the first quarter was 77.5%, compared to 77.4% in the same period in 2009 and 76.5% in the fourth quarter of 2009. -- Diluted earnings per American depositary share ("ADS") (one ADS representing one ordinary share) in the first quarter of 2010 were US$0.10.
"We are pleased to deliver financial results above our expectations for the first quarter of 2010," said Mr. Jianhua Zhu, China Digital TV's chairman and chief executive officer. "The core CA business benefited from cable TV operators increasing investments in upgrades from analogue to digital and from one-way to two-way transmission on their networks. With clear government policies encouraging the development of China's digital TV industry, we believe the lift in smart card shipments should continue in the second quarter. We maintain, however, a cautious attitude as some operators may delay smart card purchase plans during the course of the ongoing cable network consolidation."
"For the rest of 2010, we will continue to enhance our core CA offering, explore opportunities to expand our CA business to overseas markets and invest in value-added services. While revenue contributions from these initiatives may not be substantial in the near term, they are important for building our long-term competitive advantages in the digital TV value chain," added Mr. Zhu. "Overall, we believe that our industry is moving toward a higher level of commercialization and China Digital TV has more focused strategies in place to position us for long-term industry leadership."
China Digital TV's chief financial officer, Mr. Mason Xu commented, "While increasing investment in research & development for value-added services and exploring innovative business models, we will also continue to prudently manage costs to support profitable growth. Furthermore, we will be implementing a more rigorous performance evaluation system this year to increase productivity and further strengthen the quality of our workforce."
First Quarter 2010 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 2010, net revenues were US$14.0 million, a decrease of 2.1% from the first quarter of 2009 and an increase of 2.5% from the fourth quarter of 2009. The slight year-over-year decrease in net revenues was primarily due to a decrease in revenues from smart card sales. The quarter-over-quarter increase was largely due to an increase in revenues from smart card sales, which was partially offset by a decline in revenues from services.
Revenue Breakdown For the three months ended March 31, December 31, March 31, 2010 2009 2009 (in U.S. dollars, in thousands) Products Smart Cards $ 13,124 $ 12,370 $ 13,518 Others products 48 57 14 Subtotal 13,172 12,427 13,532 Services Head-end system integration 396 556 439 Head-end system development 73 199 47 Licensing income 395 283 260 Royalty income 56 229 120 Other service 1 121 -- Subtotal 921 1,388 866 Total revenues $ 14,093 $ 13,815 $ 14,398
Revenues from smart cards and related products were US$13.2 million in the first quarter of 2010, a decrease of 2.7% from the same period in 2009 and an increase of 6.0% from the fourth quarter of 2009. Sales of smart cards and related products accounted for 93.5% of total revenues in the first quarter of 2010, up from 90.0% in the fourth quarter of 2009. The year-over-year decrease was primarily due to a decrease in the average selling price ("ASP") of smart cards, which was partially offset by an increase in the volume of smart card shipments. The quarter-over-quarter increase was mainly due to the increase in the volume of smart card shipments in the first quarter of 2010.
Revenues from the Company's top five customers accounted for 27.1% of total revenues in the first quarter of 2010, compared to 22.7% in the fourth quarter of 2009.
Revenues from services were US$0.9 million in the first quarter of 2010, an increase of 6.4% from the same period in 2009 and a decrease of 33.6% from the fourth quarter of 2009. Service revenues accounted for 6.5% of total revenues in the first quarter of 2010. The year-over-year increase was principally a result of higher licensing income. The quarter-over-quarter decrease was primarily due to decreases in system integration and development revenues, royalty incomes and other services revenues. In particular, the quarter-over-quarter decrease in other services revenues was attributable to the discontinuation of digital TV based advertising services, which had accounted for the majority of other services revenues in the fourth quarter of 2009.
Gross profit in the first quarter of 2010 was US$10.9 million, a decrease of 2.0% from the same period in 2009 and an increase of 3.7% from the fourth quarter of 2009. Gross margin was 77.5% in the first quarter of 2010, compared to 77.4% in the same period in 2009 and 76.5% in the fourth quarter of 2009. Year-over-year gross margin remained stable despite decreases in the ASP mainly due to cost control measures relating to raw material purchases and outsourced production that were implemented during the first quarter of 2010. The quarter-over-quarter improvement in gross margin was primarily due to higher margin businesses, principally sales of smart cards, accounting for 93.5% of total revenues, compared to 90.0% in the fourth quarter of 2009.
In the first quarter of 2010, the ASP for smart cards decreased by 2.3% compared to the fourth quarter of 2009. The unit cost of smart cards in the first quarter decreased by 0.6% compared to the fourth quarter of 2009.
Operating expenses in the first quarter of 2010 were US$5.6 million, an increase of 16.6% from the first quarter of 2009 and a decrease of 4.5% from the fourth quarter of 2009.
-- Research and development expenses in the first quarter were US$2.0 million, an increase of 8.5% from the same period in 2009 and a decrease of 16.8% from the fourth quarter of 2009. The year-over-year increase was mainly due to increases in both the number and average salaries of research & development staff. The quarter-over-quarter decrease was mainly due to a US$ 0.3 million impairment loss of certain intangible assets in the fourth quarter of 2009. -- Sales and marketing expenses in the first quarter of 2010 were US$1.9 million, an increase of 22.0% from the same period in 2009 and a decrease of 13.0% from the fourth quarter of 2009. The year-over-year increase was mainly due to increased travelling expenses and marketing activities. The quarter-over-quarter decrease was primarily due to decreases in consulting fees relating to marketing and decreased travelling expenses. -- General and administrative expenses in the first quarter of 2010 were US$1.7 million, an increase of 21.7% from the same period in 2009 and an increase of 34.1% from the fourth quarter of 2009. The year-over- year and quarter-over-quarter increases were mainly due to additional share-based compensation expenses relating to options granted to employees in the first quarter of 2010.
Income from operations in the first quarter was US$5.3 million, a 16.3% decrease from the same period in 2009 and a 14.3% increase from the fourth quarter of 2009.
Operating margin, defined as income from operations divided by net revenues, in the first quarter of 2010 was 37.4%, compared to 43.8% in the same period in 2009 and 33.6% in the fourth quarter of 2009.
Income tax expenses in the first quarter of 2010 were US$0.9 million, compared to income tax expenses of US$0.5 million in the same period in 2009 and income tax expenses of nil in the fourth quarter of 2009. In 2010, the Company is subject to a 15% tax rate, compared to a 7.5% preferential tax rate in 2009.
Net income attributable to China Digital TV in the first quarter of 2010 was US$5.7 million, a decrease of 24.1% from the same period in 2009 and a decrease of 3.9% from the fourth quarter of 2009.
Non-GAAP net income attributable to China Digital TV, defined as net income excluding certain non-cash expenses, such as share-based compensation expenses and amortization of acquired intangible assets relating to business acquisitions, in the first quarter of 2010 was US$6.5 million, a decrease of 19.4% from the corresponding period in 2009 and an increase of 0.2% from the fourth quarter of 2009.
Balance Sheet and Cash Flow
As of March 31, 2010, China Digital TV had cash and cash equivalents, restricted cash and deposits with maturity over three months and short-term investments totaling US$235.6 million. In the first quarter of 2010, cash flows from operations were approximately US$5.9 million.
Business Outlook
Based on information available as of May 11, 2010, China Digital TV expects smart card shipments for the second quarter of 2010 to be in the range of 2.67 million to 2.87 million. Net revenues for the second quarter of 2010 are expected to be in the range of US$14.0 million to US$14.9 million, compared to US$14.6 million in the second quarter of 2009.
Conference Call Information
The Company will hold an earnings conference call at 8:00 p.m., U. S. Eastern Daylight Time, on May 11, 2010 (8:00 a.m. on May 12, Beijing/Hong Kong Time).
Conference Call Dial-in Information United States Toll Free: +1-866-804-6927 International: +1-857-350-1673 Hong Kong: +852-3002-1672 China Toll Free: +10-800-130-0399 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 11, 2010 and 11:00 p.m. on May 18, 2010 Eastern Daylight Time.
Replay Information United States: +1-888-286-8010 International: +1-617-801-6888 Passcode: 10787717
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 second quarter of 2010 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 are as of the date of this press release only.
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 its 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.
China Digital TV Holding Co., Ltd. Unaudited Condensed Consolidated Statements of Operations (in U.S. dollars in thousands, except share data) For the three months ended March 31, December 31, March 31, 2010 2009 2009 Revenues: Products $ 13,172 $ 12,427 $ 13,532 Services 921 1,388 866 Total revenues 14,093 13,815 14,398 Business taxes (69) (131) (80) Net revenues 14,024 13,684 14,318 Cost of Revenues: Products (2,562) (2,387) (2,663) Services (596) (822) (569) Total Cost of Revenues (3,158) (3,209) (3,232) Gross Profit 10,866 10,475 11,086 Operating expenses: Research and development expenses (2,066) (2,483) (1,904) Selling and marketing expenses (1,864) (2,142) (1,528) General and administrative expenses (1,688) (1,259) (1,387) Total Operating Expenses (5,618) (5,884) (4,819) Income from operations 5,248 4,591 6,267 Interest income 1,397 1,410 1,713 Other income/(expense) (14) (2) 28 Income before income tax 6,631 5,999 8,008 Income tax benefits / (expenses) Income tax-current (986) (318) (488) Income tax-deferred 91 306 27 Net income before net (loss)income from equity method investments 5,736 5,987 7,547 Net income(loss) from equity method investments 2 (17) 9 Net income 5,738 5,970 7,556 Net loss attributable to noncontrolling interest -- -- 4 Net income attributable to China Digital TV Holding Co., Ltd. shareholders $ 5,738 $ 5,970 $ 7,560 Net income per share: Basic $ 0.10 $ 0.10 $ 0.13 Diluted $ 0.10 $ 0.10 $ 0.13 Weighted average shares used in computation: Basic 58,146,264 58,011,236 57,332,914 Diluted 58,758,162 58,683,376 58,479,390 China Digital TV Holding Co., Ltd. Unaudited Condensed Consolidated Balance Sheets (in U.S. dollars in thousands) March 31, December 31, ASSETS 2010 2009 Current assets: Cash and cash equivalents $ 127,019 $ 131,087 Restricted cash 2,516 16 Bank deposit maturing over three months 64,022 64,021 Short-term investment 42,068 37,685 Notes receivable 1,421 2,836 Accounts receivable, net 12,465 11,229 Inventories 4,547 4,684 Prepaid expenses and other current assets 5,507 4,550 Deferred costs-current 369 363 Deferred income taxes - current 601 516 Total current assets 260,535 256,987 Property and equipment, net 2,151 2,308 Intangible assets, net 850 937 Goodwill 499 499 Long-term investments - equity method investments 1,006 1,005 Long-term investments - cost method investments 5,000 -- Long-term investments - held-to-maturity securities -- 1,190 Deferred costs-non-current 409 392 Deferred income taxes - non-current 178 170 Total assets 270,628 263,488 LIABILITIES AND EQUITY Current liabilities: Accounts payable 588 660 Accrued expenses and other current liabilities 4,836 5,340 Deferred revenue - current 4,267 3,453 Income tax payable 384 251 Total current liabilities 10,075 9,704 Deferred revenue-non-current 764 760 Total liabilities 10,839 10,464 Equity: Ordinary shares 29 29 Additional paid-in capital 159,002 157,980 Statutory reserve 12,691 12,691 Accumulated profit 81,445 75,707 Accumulated other comprehensive income 6,622 6,617 Total equity 259,789 253,024 TOTAL LIABILITIES AND EQUITY $ 270,628 $ 263,488 Reconciliation of Non-GAAP Measures
Non-GAAP net income attributable to China Digital TV Holding Co., Ltd. shareholders excludes certain non-cash expenses, such as share-based compensation expenses and amortization of intangible assets acquired from business acquisitions. The Company believes that these Non-GAAP financial measures provide 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 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, 2010 2009 2009 (in U.S. dollars, in thousands) Net Income attributable to China Digital TV Holding Co., Ltd. shareholders - GAAP $ 5,738 $ 5,970 $ 7,560 Share-based compensation 699 402 376 Amortization of intangible assets from business acquisitions 42 97 99 Net Income attributable to China Digital TV Holding Co., Ltd. shareholders - Non-GAAP $ 6,479 $ 6,469 $ 8,035
China Digital TV Holding Co., Ltd.
CONTACT: In China, Eric Yuan of China Digital TV, +86-10-8279-0021,
ir@chinadtv.cn; or Cynthia He of Brunswick Group LLC, +86.10.6566.2256,
chinadigital@brunswickgroup.com; or in the US, Kate Tellier of Brunswick Group
LLC, +1-212-706-7879, ktellier@brunswickgroup.com
Web site: http://ir.chinadtv.cn/
