SOURCE: KIT digital, Inc.

KIT digital, Inc.

March 30, 2010 07:00 ET

KIT digital Reports Record Q4 and Fiscal 2009 Results

Annual Revenue up 102% to $47.3 Million, Driving Operating EBITDA of $4.9 Million or $0.74 per Share

PRAGUE, CZECH REPUBLIC--(Marketwire - March 30, 2010) - KIT digital, Inc. (NASDAQ: KITD), a leading global provider of on-demand software solutions for managing and monetizing Internet Protocol (IP)-based video assets, reported record financial results for the fourth quarter and year ended December 31, 2009.

Revenue in the fourth quarter of 2009 increased 46% to $16.1 million from $11.0 million in the previous quarter, and increased 79% from $9.0 million in the same quarter a year ago. For the full year 2009, revenue increased 102% to $47.3 million from $23.4 million in 2008. The company's revenues are primarily comprised of software license and maintenance fees, software set-up fees, and technical integration and creative service charges.

For the fourth quarter of 2009, after recognizing the non-cash accounting impact of accounting standard ASC 815-40, net loss was $15.6 million or $(1.50) per basic and diluted share, compared to a net loss in the previous quarter of $11.1 million or $(1.65) per basic and diluted share, and a net loss in the fourth quarter of 2008 of $2.5 million or $(0.75) per basic and diluted share (please see the important discussion about the new accounting standard in the section, "About ASC 815-40 Accounting Standard," below).

Net loss for the fourth quarter 2009 included a non-cash derivative expense of $8.2 million resulting from the application of the accounting standard; $3.0 million in non-cash charges, including $834,000 in stock-based compensation; $4.7 million in restructuring and integration expenses primarily related to employee termination, acquisition-related facility closing costs and other costs directly related to the reorganization and integration of acquired companies; $1.3 million in merger and acquisitions expenses, including legal and auditing fees, investment banking advisory and intermediary fees and $443,000 of seller's fees from the acquisition of Nunet in October 2009.

For the full year 2009, after recognizing the non-cash accounting impact of accounting standard ASC 815-40, net loss was $19.9 million or $(3.03) per basic and diluted share, compared to a net loss of $19.0 million or $(7.55) per basic and diluted share in 2008. Net loss for 2009 included $12.6 million of non-cash charges, $2.5 million in merger and acquisitions expenses, and $7.0 million in expenses related to the reorganization and integration of acquired companies.

Operating EBITDA, a non-GAAP metric which management uses as a proxy for operating cash-flow, increased 240% in the fourth quarter of 2009 to a record $3.2 million or $0.31 per basic and diluted share from $927,000 or $0.14 per basic and diluted share in the previous quarter, and increased from $32,000 or $0.01 per basic and diluted share in the fourth quarter of 2008.

For the full year 2009, operating EBITDA was a record $4.9 million or $0.74 per basic and diluted share, an improvement from an operating EBITDA loss of $7.2 million or $(2.88) per basic and diluted share in 2008. The company defines operating EBITDA as earnings before non-cash derivative income/loss; non-cash stock based compensation; acquisition-related restructuring costs and integration expenses; impairment of property and equipment; merger and acquisition expenses; and depreciation and amortization (see important discussion of operating EBITDA in "About the Presentation of Operating EBITDA," below).

Cash and cash equivalents at December 31, 2009 totaled $6.8 million, as compared to $5.9 million at December 31, 2008. Pro forma of the issuance of common shares and cash outlay related to the recently announced acquisition of Multicast Media, the repurchase of outstanding in-the-money warrants, and the incurrence of all restructuring costs related to the previous acquisitions of The FeedRoom, Nunet and Multicast, KIT digital management estimated it will have between approximately 17.5 and 18.0 million as-diluted shares outstanding, and approximately $15 million in net cash and equivalents on its balance sheet.

Q4 2009 Selected Client Wins, By Region

Europe, Middle East & Africa (EMEA):

  • Vodafone, the world's largest mobile telecommunications company, expanded its relationship with KIT digital by deploying upgraded features of KIT VX to enhance its mobile TV capabilities in several major territories.

  • Reycom, a leading supplier of entertainment solutions to cable network operators and telecommunication companies globally, selected KIT VX to deploy a video-on-demand solution on its set-top boxes.

  • Sports News Television (SNTV), the world's leading sports news video agency, selected KIT VX to manage its production, voice-over, graphics, and distribution of World Cup 2010 content to online and mobile customers.

  • Telefonica, the leading telecommunications operator in the Spanish and Portuguese speaking markets globally, used KIT VX to more effectively manage rich media codecs for its MPEG transport vans.

  • News International, the main UK subsidiary of News Corporation and owner of publications like The Sun and The Times, expanded its relationship with KIT digital by using KIT VX to stream live events for Conservative and Labour party conferences.

  • Can Communicate, a brand-generated content specialist, selected KIT digital's VX Digital Junction solution as a more efficient way to manage overall content distribution needs for their media clients.

  • Czech TV, the national broadcaster of the Czech Republic, expanded its implementation of KIT VX by deploying additional features related to managing its Avid HD compositional suite, Omneon play-out servers for regional broadcasting, and Snell Kahuna switcher.

Asia-Pacific:

  • SalesForce.com, an enterprise CRM, selected KIT digital and its VX platform for digital video management in India, Singapore and Australia.

  • Carsales, one of Asia's largest automotive classifieds services, implemented KIT VX for video management and delivery across its multiple online assets.

  • GE Money, the world's largest retailer financing program provider, extended its relationship with KIT digital across a wide variety of rich media activities in Asia-Pacific.

  • Sanitarium, one of the world's biggest selling cereal brands, selected KIT digital to develop its All Blacks promotion, including TV, point-of-sale, web development, pack design and premiums.

  • ARC, one of Asia's largest manufacturers and suppliers of steel reinforcing products, selected KIT digital to deploy an overall rich media strategy and redevelopment.

The Americas:

  • A major consumer goods company expanded its relationship with KIT digital by deploying KIT VX for its internal communications platform.

  • Legg Mason, one of the largest asset management firms in the world, implemented its online customer communications solution using KIT VX.

  • A global pharmaceutical company extended its relationship with KIT digital by deploying KIT VX to communicate with employees, vendors and commercial partners across the world via IP-video.

Management Commentary
"2009 was a milestone year for KIT digital," said the company's chairman and CEO, Kaleil Isaza Tuzman. "Q4 2009 marked our fifth quarter of sequential revenue and operating EBITDA growth on a U.S. dollar basis and our eleventh quarter of sequential revenue and operating EBITDA growth on a billed-currency basis. Our accelerating operating and free cash-flow margins demonstrate the significant operating leverage in our business model.

"From an operational perspective, we achieved what we set out to accomplish in 2009: strong top-line growth, margin expansion, free cash flow-positive inflection point, expansion of our VX platform software capabilities across mobile handsets and IPTV-enabled television sets, and the successful kick-off of the integration of The FeedRoom and Nunet acquisitions."

Gavin Campion, president of KIT digital, commented: "We see tremendous potential for '3-screen' IP video platform deployments with mobile operators as well as MSOs globally, and see particularly strong growth in the BRIC countries. Expansion into these markets and the launch of our new VX-one platform are areas of major strategic focus in 2010. We are also focused on expanding our existing client base, while taking advantage of cross-selling opportunities within Multicast, The FeedRoom and Nunet client bases."

Added Isaza Tuzman: "We believe VX-one will sustain our position as the only truly '3-screen' IP video platform provider in the global marketplace. In 2010, as in 2009, we expect to realize greater market share, continued revenue growth, cash flow margin expansion, and a strong ROI for our shareholders."

Conference Call
KIT digital's executive management team will host an online video presentation to discuss these fourth quarter and fiscal 2009 results today at 10:30 a.m. Eastern time. The presentation will be followed by a live question and answer period.

A video and audio-only broadcast of the conference call will be simultaneously streamed online via a link provided in the Investor Relations section of the company's website at http://ir.kitd.com or by clicking here.

For participants who wish to ask a question during the Q&A period or access the call via telephone only, please call the conference telephone number, below, at least 5-10 minutes prior to the scheduled start time:

Call Start Time: 10:30 a.m. Eastern time (7:30 a.m. Pacific time)
Dial-in # North America toll-free: +1-800-862-9098
Dial-in # outside of North America: +1-785-424-1051
Please provide the operator the Conference ID: 7KITDIGITAL

If you have any difficulty connecting with the conference call, please contact the Liolios Group at +1-949-574-3860.

The video presentation will be available for replay via the company's website following the call. A replay via telephone will be available after 1:30 p.m. Eastern time and until April 30, 2010:

Toll-free replay # (North America): +1-800-839-3736
International replay # (outside of North America): +1-402-220-2978
(No passcode required)

About ASC 815-40 Accounting Standard
The accounting standard ASC 815-40 was implemented at the beginning of fiscal 2009 and requires companies to calculate the fair value of warrants containing reset provisions and classify them as derivative liabilities. Therefore, under the terms of the standard, increases in the trading price of the company's common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the company's common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.

Due primarily to an increase in the company's stock price from $9.91 at September 30, 2009 to $11.00 at December 31, 2009, net loss for the fourth quarter of 2009 included a non-cash derivative expense of $8.2 million.

About KIT digital, Inc.
KIT digital (NASDAQ: KITD) is a leading, global provider of on-demand, Internet Protocol (IP)-based video asset management systems (VAMS). KIT VX, the company's end-to-end software platform, enables enterprise clients to acquire, manage and distribute video assets across the three screens of today's world: the personal computer, mobile device, and IPTV-enabled television set. The application of VX ranges from commercial video distribution to internal corporate deployments, including corporate communications, human resources, training, security and surveillance. KIT digital's client base includes more than 1,000 enterprise customers across 30+ countries, including The Associated Press, Best Buy, Bristol-Myers Squibb, Disney-ABC, Fedex, General Motors, Google, Hewlett-Packard, Home Depot, IMG Worldwide, Intel, News Corp, Telefonica, the U.S. Department of Defense, Verizon, and Vodafone. KIT digital is headquartered in Prague, and maintains principal offices in Atlanta, Cairo, Cologne, Dubai, Melbourne (Australia), London, New York, Stockholm and Toronto. For additional information, visit www.kitd.com or follow the company on Twitter at twitter.com/KITdigital.

About the Presentation of Operating EBITDA
Management uses operating EBITDA for forecasting and budgeting, and as a proxy for operating cash flow. Operating EBITDA is not a financial measure calculated in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation, or as an alternative to net income, operating income or other financial measures reported under GAAP. The company defines operating EBITDA as earnings before: non-cash derivative income/loss, non-cash stock based compensation; acquisition-related restructuring costs and integration expenses; impairment of property and equipment; merger and acquisition expenses; and depreciation and amortization. Other companies (including the company's competitors) may define operating EBITDA differently. The company presents operating EBITDA because it believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in a similar industry. Management also uses this information internally for forecasting, budgeting and performance-based executive compensation. It may not be indicative of the historical operating results of KIT digital nor is it intended to be predictive of potential future results. See "GAAP to non-GAAP Reconciliation" table below for further information about this non-GAAP measure and reconciliation of operating EBITDA to net loss for the periods indicated. Shares used in the calculation of GAAP diluted earnings per share are the same as the shares used in the calculation of diluted adjusted operating income/(loss) per share except when the company reports a GAAP loss.

GAAP to non-GAAP              Three months ended          
 Reconciliation                  December 31,             Year ended
(amounts in thousands)           (Unaudited)             December 31,  
                            ----------------------  ---------------------- 
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ---------- 
Consolidated Statement of
 Operations Reconciliation

Net loss on a GAAP basis    $  (15,592) $   (2,463) $  (19,942) $  (18,975)
  Non-cash stock-based
   compensation                    834         607       1,922       4,869
  Merger and acquisition
   and investor relations
   expenses                      1,255         427       2,506         427
  Depreciation and
   amortization                  1,632         738       4,202       1,771
  Restructuring charges          1,895          15       2,549       3,068
  Integration expenses           2,797         266       4,429       1,111
  Impairment of property
   and equipment                     -           -           -         229
  Impairment of intangible
   asset                           500           -         500           -
  Interest income                  (19)        (37)        (50)       (164)
  Interest expense                  78         143         519         228
  Amortization of deferred
   financing costs                   -         110       1,175         110
  Derivative expense             8,248           -       6,015           -
  Other expense (income)           415         110          10         (31)
  Registration rights
   liquidated damages                -         117           -         117
  Income tax expense             1,110         114       1,114         116
  Non-controlling interest           -        (115)          -        (107)
                            ----------  ----------  ----------  ---------- 
Operating EBITDA (loss)     $    3,153  $       32  $    4,949  $   (7,231)
                            ==========  ==========  ==========  ========== 

Consolidated Statement of
 Operations Reconciliation
 per Share

Net income (loss) per share
 on a GAAP basis            $    (1.50) $    (0.75) $    (3.03) $    (7.55)
  Non-cash stock-based
   compensation                   0.08        0.18        0.29        1.94
  Merger and acquisition
   and investor relations
   expenses                       0.12        0.13        0.38        0.17
  Depreciation and
   amortization                   0.16        0.22        0.64        0.70
  Restructuring charges           0.18           -        0.39        1.22
  Integration expenses            0.27        0.08        0.67        0.44
  Impairment of property
   and equipment                     -           -           -        0.09
  Impairment of intangible
   asset                          0.05           -        0.08           -
  Interest income                    -       (0.01)      (0.01)      (0.07)
  Interest expense                0.01        0.04        0.08        0.09
  Amortization of deferred
   financing costs                   -        0.03        0.18        0.04
  Derivative expense              0.79           -        0.91           -
  Other expense (income)          0.04        0.03       (0.01)      (0.01)
  Registration rights
   liquidated damages                -        0.04           -        0.05
  Income tax expense              0.11        0.04        0.17        0.05
  Non-controlling interest           -       (0.04)          -       (0.04)
                            ----------  ----------  ----------  ---------- 
Operating EBITDA (loss) per
 share                      $     0.31  $    (0.01) $     0.74  $    (2.88)
                            ==========  ==========  ==========  ========== 

Weighted average common
 shares outstanding         10,409,451   3,281,570   6,573,970   2,512,415
                            ==========  ==========  ==========  ========== 

KIT digital Forward-Looking Statement
This press release contains certain "forward-looking statements" related to the businesses of KIT digital, Inc., which can be identified by the use of forward-looking terminology such as "believes," "expects", "plans" or similar expressions. Statements in this announcement that are forward-looking include, but are not limited to statements made by Mr Isaza Tuzman that the company's VX-one software platform will sustain KIT digital's position as the only truly '3-screen' IP video platform provider in the global marketplace, that the company expects to realize greater market share, continued revenue growth, cash flow margin expansion and a strong ROI for its shareholders. Such forward-looking statements involve known and unknown risks and uncertainties, including uncertainties relating to product development and commercialization, the ability to obtain or maintain patent and other proprietary intellectual property protection, market acceptance, future capital requirements, regulatory actions or delays, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our public filings with the U.S. Securities and Exchange Commission. KIT digital is not under obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

                KIT DIGITAL, INC. AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS   
             (Amounts in Thousands, Except Share Data)

      
                                               December 31,   December 31,
                                                   2009           2008
                                              -------------  -------------

Assets:
Current assets:
    Cash and cash equivalents                 $       6,791  $       5,878
    Investments                                         217              -
    Accounts receivable, net                         17,258          8,331
    Accrued revenue                                   2,960              -
    Inventory, net                                      708          2,130
    Other current assets                              2,205          1,539
                                              -------------  -------------
  Total current assets                               30,139         17,878
                                              -------------  -------------

    Property and equipment, net                       5,697          2,928
    Software, net                                     3,436          2,265
    Customer list, net                                4,650          2,988
    Goodwill                                         36,492         15,167
    Other assets                                          -             83
                                              -------------  -------------
  Total assets                                $      80,414  $      41,309
                                              =============  ============= 

Liabilities and Stockholders' Equity:
Current liabilities:
    Bank overdraft                            $       1,623  $       1,456
    Capital lease and other obligations               1,218            395
    Secured loans payable                             1,321            966
    Senior secured notes payable, net of debt
     discount                                             -            950
    Accounts payable                                  6,647          5,775
    Accrued expenses                                  8,501          2,240
    Income tax payable                                  312            160
    Deferred tax liability                              580              -
    Acquisition liability - Kamera                        -          3,000
    Acquisition liability - Visual                    1,075          2,218
    Derivative liability                             21,314              -
    Other current liabilities                         3,455          3,818
                                              -------------  -------------
  Total current liabilities                          46,046         20,978

    Capital lease and other obligations, net 
     of current                                         377            949
    Secured loans payable, net of current                 -            236
    Acquisition liability - Visual, net of
     current                                              -          1,075
                                              -------------  -------------
  Total liabilities                                  46,423         23,238
                                              -------------  -------------

Equity:
  Stockholders' equity:
    Common stock, $0.0001 par value: authorized
     30,000,000 shares; issued and outstanding
     10,844,853 and 4,183,280, respectively               1              -
    Additional paid-in capital                      128,263        101,057
    Accumulated deficit                             (93,942)       (82,499)
    Accumulated other comprehensive (loss)
     income                                            (331)          (250)
                                              -------------  -------------
    Total stockholders' equity                       33,991         18,308
                                              -------------  -------------
    Non-controlling interest                                          (237)
                                              -------------  ------------- 
    Total equity                                     33,991         18,071
                                              -------------  -------------
  Total liabilities and equity                $      80,414  $      41,309
                                              =============  ============= 





                KIT DIGITAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
       (Amounts in Thousands, Except Share and Per Share Data)
                            (Unaudited)


                              Three months ended          
                                 December 31,             Year ended
                                  (Unaudited)            December 31,  
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Revenue                     $   16,130  $    9,033  $   47,284  $   23,401
                            ----------  ----------  ----------  ----------

Variable and direct third
 party costs:
  Cost of goods and services     3,922       2,845      15,584       2,845
  Hosting, delivery and
   reporting                       520         423       1,547       2,024
  Content costs                    273         734       1,378       2,419
  Direct third party
   creative production 
   costs                           670         377       3,211       3,109
                            ----------  ----------  ----------  ----------
Total variable and direct
 third party costs               5,385       4,379      21,720      10,397
                            ----------  ----------  ----------  ----------

Gross profit                    10,745       4,654      25,564      13,004

General and administrative
 expenses:
  Compensation, travel and
   associated costs
   (including non-cash
   stock-based compensation
   of $834, $607, $1,922 and
   $4,869, respectively)         5,289       3,996      16,309      20,366
  Legal, accounting, audit
   and other professional
   service fees                    513         322       1,097       1,227
  Office, marketing and
   other corporate costs         2,624         911       5,131       3,511
  Merger and acquisition and
   investor relations
   expenses                      1,255         427       2,506         427
  Depreciation and
   amortization                  1,632         738       4,202       1,771
  Restructuring charges          1,895          15       2,549       3,068
  Integration expenses           2,797         266       4,429       1,111
  Impairment of property and
   equipment                         -           -           -         229
  Impairment of intangible
   asset                           500           -         500           -
                            ----------  ----------  ----------  ----------
Total general and
 administrative expenses        16,505       6,675      36,723      31,710
                            ----------  ----------  ----------  ----------
Loss from operations            (5,760)     (2,021)    (11,159)    (18,706)

 Interest income                    19          37          50         164
 Interest expense                  (78)       (143)       (519)       (228)
 Amortization of deferred
  financing costs and debt
  discount                           -        (110)     (1,175)       (110)
 Derivative expense             (8,248)          -      (6,015)          -
 Other (expense) income           (415)       (110)        (10)         31
 Registration rights
  liquidated damages                 -        (117)          -        (117)
                            ----------  ----------  ----------  ----------
Net loss before income
 taxes                         (14,482)     (2,464)    (18,828)    (18,966)

 Income tax expense             (1,110)       (114)     (1,114)       (116)
                            ----------  ----------  ----------  ----------
Net loss                       (15,592)     (2,578)    (19,942)    (19,082)

 Non-controlling interest            -         115           -         107
                            ----------  ----------  ----------  ----------
Net loss available to
 common shareholders        $  (15,592) $   (2,463) $  (19,942) $  (18,975)
                            ==========  ==========  ==========  ========== 

Basic and diluted net loss
 per common share           $    (1.50) $    (0.75) $    (3.03) $    (7.55)
                            ==========  ==========  ==========  ========== 
Basic and diluted weighted
 average common shares
 outstanding                10,409,451   3,281,570   6,573,970   2,512,415
                            ==========  ==========  ==========  ========== 

Comprehensive loss:
Net loss                    $  (15,592) $   (2,463) $  (19,942) $  (18,975)
  Foreign currency
   translation                    (530)        (60)        (97)       (304)
  Change in unrealized gain
   on investments, net              15           -          17           -
                            ----------  ----------  ----------  ----------
Comprehensive loss          $  (16,107) $   (2,523) $  (20,022) $  (19,279)
                            ==========  ==========  ==========  ==========

Contact Information

  • KIT digital Contact:
    Adam Davis
    Global Communications Manager
    Tel. +1-609-468-9500
    Email Contact

    KIT digital Investor Relations Contact:
    Matt Glover
    Liolios Group, Inc.
    Tel. +1-949-574-3860
    Email Contact