ZST Digital Networks Inc. (ZSTN) Posts Solid Quarterly Growth Driven by Market Demand

QualityStocks would like to highlight ZST Digital Networks, Inc. (NASDAQ: ZSTN), a China-based company, principally engaged in (1) supplying digital and optical network equipment and providing installation services to cable system operators in China and (2) providing GPS location and tracking services to local logistics and transportation companies in China. The company has developed a line of IPTV devices that are used to provide bundled cable television, Internet, and telephone services to residential and commercial customers.

In the company’s news yesterday,

ZST Digital Networks announced its financial results for the second quarter ended June 30, 2011.

The company reported total revenue of $41.4 million, a 25 percent increase compared to the $33.0 million reported for the second quarter of 2010.

Gross profit for the second quarter 2011 increased 24 percent to $10.2 million, compared to the second quarter 2010.Gross profit margin for the second quarter of 2011 was 24.7 percent, essentially flat compared to 25 percent in the second quarter of 2010.
Operating income for the second quarter 2011 was $8.8 million, an increase of 22 percent compared to the second quarter of 2010 operating income of $7.2 million.

ZST reported net income for the second quarter of 2011 at $6.4 million, or $0.55 per diluted share, a 22 percent increase over the $5.2 million, or $0.45 per diluted share, reported in the second quarter of 2010.

As of June 30, 2011, ZST had cash and cash equivalents totaling $50.2 million compared to $40.2 million as of March 31, 2011.

The company attributes the solid quarterly growth to strong sales of its commercial GPS fleet management products and services, as well as to the continued expansion of its cable TV-related business. Henry Ngan, CFO of ZST, emphasized growing demand for GPS-related products and said the company plans on delivering continued growth in the second half of 2011.

“We delivered a strong financial performance in the second quarter with year-over-year revenue increases across all three of our product segments. We believe that the underlying demand for our products and services remains healthy, and we are especially pleased with the rapid growth of our commercial GPS segment,” Ngan stated in the press release. “While gross profit margin declined slightly in the quarter due to the change in sales mix of our IPTV products, we nevertheless maintained a healthy profit margin level thanks to the high-margin profile of our commercial GPS products and services. We further strengthened our balance sheet in the second quarter, and we believe that we are well-positioned to fund our continued growth. We enter the second half of the year on a strong footing and maintain our commitment to increasing long-term shareholder value.”

For the full year 2011, ZST reiterates its estimates that revenues will range between $160 million and $175 million with net income ranging between $28 million and $30 million.

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Forward-Looking Statement:

This release may contain 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. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Risks and uncertainties applicable to the company and its business could cause the company's actual results to differ materially from those indicated in any forward-looking statements.