$永新视博(STV)$ Revenues from smart cards decreased by 37.2% to US$9.0 million in the third quarter of 2015 from US$14.4 million in the prior year period. The decrease was mainly due to a decrease in shipment volumes of smart cards, as well as a decline in smart card ASPs. Sales of smart cards accounted for 84.6% of total revenues in the third quarter of 2015, as compared to 83.8% in the prior year period.

Revenues from other products decreased by 79.6% to US$0.3 million in the third 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 3.0% of total revenues in the third quarter of 2015, as compared to 9.1% in the prior year period.

Revenues from services increased by 7.4% to US$1.3 million in the third quarter of 2015 from US$1.2 million in the prior year period. The increase was primarily due to the increase in revenues from cloud computing games, as well as licensing income, which was partially offset by a decrease in head-end system integration. Revenues from services accounted for 12.4% of total revenues in the third quarter of 2015, as compared to 7.2% in the prior year period.

Cost of revenues from smart cards and other products decreased by 36.3% to US$2.1 million in the third quarter of 2015 from US$3.3 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, as well as a decline in cost of revenues from surface mounted chips resulting from decreased shipment volumes of surface mounted chips. Cost of revenues from smart cards and other products accounted for 58.7% and 6.9%, respectively, of total cost of revenues in the third quarter of 2015, as compared to 61.3% and 17.4% in the prior year period.

Cost of revenues from services increased by 23.9% to US$1.1 million in the third quarter of 2015 from US$0.9 million in the prior year period. The increase was mainly due to an increase in cost of revenues from cloud computing games. Cost of revenues from services accounted for 34.5% of total cost of revenues, as compared to 21.3% in the prior year period.

Gross profit in the third quarter of 2015 decreased by 42.5% to US$7.4 million from US$12.8 million in the prior year period. Gross margin, which is equal to gross profit divided by net revenues, was 69.8% in the third quarter of 2015, as compared to 75.5% in the prior year period. The decline in gross margin was primarily due to a decrease in gross margin of smart cards, attributable to the decline in smart card ASPs, which accounts for a high proportion of total revenues.




In the third quarter of 2015, the ASP of smart cards decreased by 8.1% year over year. In addition, the unit cost of smart cards increased by 7.2% year over year.

Operating expenses in the third quarter of 2015 decreased by 19.7% to US$8.4 million from US$10.5 million in the prior year period.

● Research and development expenses in the third quarter of 2015 decreased by 16.5% to US$3.9 million from US$4.7 million in the prior year period. The decline was mainly due to a decrease in personnel related expenses resulting from lower headcount.

● Selling and marketing expenses in the third quarter of 2015 decreased by 22.5% to US$2.6 million from US$3.4 million in the prior year period. The decline was mainly due to a decrease in average compensation and marketing expenses.

● General and administrative expenses in the third quarter of 2015 decreased by 21.9% to US$1.9 million from US$2.4 million in the prior year period. The decline was mainly due to a decrease in consulting expenses.

Loss from operations in the third quarter of 2015 was US$1.0 million, as compared to an income from operations of US$2.3 million in the prior year period.

Income tax expenses in the third quarter of 2015 decreased by 57.4% to US$0.7 million from US$1.6 million in the prior year period. The decline was mainly due to a decrease in taxable income.

Net loss attributable to holders of ordinary shares in the third quarter of 2015 was US$0.5 million, as compared to a net income attributable to holders of ordinary shares of US$1.5 million in the prior year period.

Non-GAAP net loss2 attributable to holders of ordinary shares in the third quarter of 2015 was US$0.4 million, as compared to a non-GAAP net income attributable to holders of ordinary shares of US$1.7 million in the prior year period3.

Balance Sheet and Cash Flow

As of September 30, 2015, China Digital TV had cash and cash equivalents and restricted cash totaling US$67.3 million. In the third quarter of 2015, cash flow generated from operations was approximately US$0.8 million.

Business Outlook

Based on information available as of November 17, 2015, China Digital TV expects smart card shipment volumes in the fourth quarter of 2015 to be in the range of 2.6 million to 2.9 million. Net revenues in the fourth quarter of 2015 are expected to be in the range of US$10.6 million to US$11.2 million.