China Digital TV Holding (STV) Q4 2016 Results - Earnings Call Transcript

| About: China Digital (STVVY)
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China Digital TV Holding Co., LTD. (STV) Q4 2016 Earnings Conference Call February 28, 2017 7:00 PM ET

Executives

Nan Hao - Investor Relations Manager

Operator

Good morning and good evening, everyone, and welcome to the China Digital TV’s Fourth Quarter 2016 Earnings Conference Call. All participants are now in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on China Digital TV’s Investor Relations website.

I would now like to turn the conference call to – over to the host for today, Mr. Nan Hao, Investor Relations Manager at China Digital TV. Please go ahead.

Nan Hao

Thank you, operator, for fourth quarter 2016 earnings conference call. With me here today – Good morning and good evening, everyone. Thank you for joining China Digital TV’s fourth quarter 2016 earnings conference call.

With me here today is, Mr. Zhenwen Liang, our CFO, who will answer your questions after the prepared remarks.

Before we begin, I refer you to the Safe Harbor statements in our earnings release, which also applies for our earnings call today. As well, we will make forward-looking statements.

On behalf of our CEO, Mr. Jianhua Zhu, and CFO, Mr. Zhenwen Liang, I shall begin our presentation with highlights for the quarter, followed by a discussion about the financial results.

First, I would like to reiterate that that the sale of our interest in Beijing Super TV, we have received the sales proceeds from the buyer through its China – Chinese affiliate. Beijing Super TV also completed the change of its business registration with the Beijing Administration for Industry and Commerce. The buyer is in the process of converting the RMB into U.S. dollars. After the sale of Super TV, the company will no longer conduct CA or CA related business. We will focus on emerging growth opportunities.

Turning to the operations of our Cyber Cloud business. We are glad to end 2016 with robust growth in our cloud business, primarily driven by our rapid customer expansion. Full-year revenues from the cloud business is stable as compared with the prior year.

In the fourth quarter, we further expanded our geographical footprints to now, including Shandong province through a partnership with Shandong Cable TV, which covers over 20 million users across its network, along with Sichuan telecom, Hubei Unicom and other partners previously added.

As of December 31, 2016, the total Cyber Cloud coverage has the ability to reach over 130 million users across China. We believe we have built a solid foundation for national-wide market penetration. In 2017, we will continue to strengthen these collaborations with our current partners and optimize our operations and managements in this respective markets.

In addition, as many of you may not have know, Beijing Cyber Cloud Technology, a subsidiary of China Digital TV recently entered a Capital Increase Agreement with ShouTai JinXin Capital Management, a leading fund management company in China. In December of 2016, Cyber Cloud received a RMB33 million strategic investments for 10% equity ownership in our cloud computing business.

After the capital injection, China Digital TV now maintains 58% ownership of the subsidiary’s equity. This founding will be used for the developments of new content offering and R&D to optimize our platform and supporting ongoing operations. Going forward, we will leverage our legacy corporate relationships with China cable television industry to develop more growth opportunities and it remain committed to generating further values for our shareholders.

Before turning into financial results, I refer to you the U.S. GAAP pursuant to which we comply. The company’s financial statements have reflected the effects of the discontinued operations of our CA and CA related business.

Beginning in the fourth quarter of 2016, the operational results of the CA and CA related businesses have been excluded from the company’s financial results from continuing operations. Comparative adjustments to the historical statements of operations have also been made to provide a consistent basis of comparison for the financial results.

With that, we will turn to the financial results for the fourth quarter. Please note that, unless otherwise stated, all monetary amounts are set in U.S. dollars.

Net revenues decreased by 34.8% to US$0.8 million from US$1.2 million in the prior year period. The decline in net revenues was primarily due to the decreased revenues from system development in the fourth quarter of 2016.

Cost of revenues decreased by 10.4% to US$0.6 million from US$0.7 million in the prior year. The decline in cost of revenues was primarily due to a decrease in cost of revenues from system development in the fourth quarter of 2016.

Gross profit for the fourth quarter was US$0.2 million, as compared with US$0.5 million in the prior year period. Gross margin was 24.4% compared to 45% a year ago.

Operating expenses in the fourth quarter came in at US$2.9 million, slightly down compared to US$3.2 million in the prior year period.

Loss from operations in the fourth quarter of 2016 was US$2.7 million. It remained relatively stable as compared with the prior year period.

Income tax expenses for the fourth quarter decreased by 40% year-over-year to US$0.05 million from US$0.09 million in the same period last year.

Net income attributable to holders of ordinary shares in the fourth quarter of 2016 increased to US$46.3 million from US$2.3 million in the prior year period. This increase was primarily due to the gain from the sale of Beijing Super TV.

Net loss from continuing operations attributable to the company’s narrowed by 47.6% to US$1.3 million, as compared to US$2.5 million in the prior year period.

Net income from discontinued operations attributable to the company increased to US$47.7 million from US$4.8 million in the prior year period.

Non-GAAP net income attributable to holders of ordinary shares in the fourth quarter of 2016 increased to US$46.9 million from US$2.3 million in the same period last year.

As of December 31, 2016, China Digital TV had cash and cash equivalents, restricted cash, and term deposits totaling US$124.4 million on the balance sheet.

Now, we are ready for the question-and-answer sessions. Please note that our CFO will answer the questions in Chinese and I will translate into English.

Operator, we may now begin the Q&A session.

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Nan Hao for any closing remarks.

Nan Hao

Once again, thank you for all joining us today. Please don’t hesitate to contact us if you have any further questions. Thank you for your continued support and we’re looking forward to talking with you in the coming quarters. Thank you.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Question-and-Answer Session

Q -

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