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