SOURCE: KIT digital, Inc.

November 17, 2008 08:30 ET

KIT digital Reports Third Quarter 2008 Results

Gross Revenues Up 57% and Net Loss per Share Improved 90% vs. Q3 2007; Operating EBITDA Loss Improved 30% and Net Loss per Share Improved 50% vs. Strong Q2 2008; Company Confirms Turning Monthly Operating EBITDA Positive in Q4 2008

DUBAI, UNITED ARAB EMIRATES--(Marketwire - November 17, 2008) - KIT digital, Inc. (OTCBB: KITD), a global provider of IP-based video enablement technologies and video-centric interactive marketing solutions, reported financial results for the third quarter ended September 30, 2008.

Q3 2008 Financial Results

Financial results in this release are quoted in U.S. dollars, although a material portion of the company's revenue is earned in other currencies.

For the third quarter of 2008, revenue totaled $5.4 million, as compared to $5.5 million in the previous quarter and $3.4 million in the same quarter a year ago. The company's revenues include software license and maintenance fees, streaming and data fees, technical and creative service charges, software set-up fees, and advertising-related income.

During the third quarter, the U.S. dollar appreciated versus the other currencies in which the company generates revenues. On a like currency basis, KIT digital increased revenues during the quarter. The company employs a "natural hedging" strategy in which management endeavors to match revenue generated in a given currency against the associated client delivery costs denominated in the same currency. This strategy results in approximately neutral cash-flow impact from foreign exchange movements, despite changes in reported gross revenues.

The net loss for the quarter was $2.6 million or ($0.02) per basic and diluted share, compared to a loss of $3.3 million or ($0.04) per basic and diluted share in the previous quarter and a loss of $8.2 million or ($0.21) per basic and diluted share in the third quarter of 2007.

The net loss for the quarter reflects several non-cash items, including $188,000 in stock-based compensation, compared to $73,000 in the previous quarter and $1.2 million in the same year ago quarter. Additionally, the net loss included restructuring charges of $162,000 relating to employee termination and facility closing costs, as compared to $146,000 in the previous quarter and none in the third quarter of 2007.

For the third quarter, operating EBITDA, a non-GAAP term, was a loss of $1.57 million, as compared to a loss of $2.24 million in the previous quarter and a loss of $6.64 million in third quarter of 2007. Operating EBITDA is defined by the company as the loss before non-cash stock based compensation, restructuring and non-recurring costs, impairment of property and equipment and depreciation and amortization. Management reports the company is turning operating EBITDA positive during the course of the current fourth quarter, and is optimistic that the company will turn free cash-flow positive by the end of this year or in beginning of the first quarter of 2009.

The weighted average common shares outstanding for the quarter totaled 114,557,722, as compared to 82,800,972 in the previous quarter and 38,907,293 in the third quarter of 2007. The common shares outstanding at November 14, 2008 totaled 114,609,788.

At the end of the third quarter of 2008, the company had a cash position of $6.1 million. Management believes the company possesses more than sufficient cash to finance its organic growth plan through to profitability, as well as to make selective acquisitions.

On October 5, 2008, subsequent to the end of the third quarter of 2008, the company acquired 100% of the capital stock of IP-based video enablement company Visual Connection, a.s., the purchase of which included a $2.5 million upfront cash payment. On November 12, 2008, the company received $1.4 million in straight (non-convertible) debt financing from Genesis Merchant Partners, L.P., secured by accounts receivable, inventory and other assets. The proceeds of this debt facility may be used for general corporate purposes. As of November 14, 2008, KIT digital had a cash position of $5.2 million.

Even after accounting for an additional 20%+ strengthening of the U.S. dollar since September 30, 2008 versus the Czech koruna, the Australian dollar and other currencies in which KIT digital does business, consolidated fourth quarter 2008 revenues are estimated to be at least $8.5 million. In the absence of the strong U.S. dollar, management estimates that fourth quarter 2008 revenues would have been more than $10 million.

Management Commentary

"The third quarter represented substantial progress across the board," said Kaleil Isaza Tuzman, chairman and chief executive officer of KIT digital. "Despite the generally slow Summer period, a faltering economy, a strong U.S. dollar and the ongoing rationalization of acquired assets, we grew our underlying business on a local currency basis versus a banner second quarter, and ended the third quarter with a September monthly operating EBITDA loss of approximately $195,000 -- versus well over $2 million of monthly burn at the beginning of the year. We are crossing over to positive monthly operating EBITDA during the current fourth quarter, just as we committed to our shareholders at the beginning of this year."

Gavin Campion, president of KIT digital, commented: "At KIT digital, we take a financially disciplined and bottom-line approach. We generally leave the small and medium-size enterprise (SME) market to our competitors, while we go after higher-margin, enterprise clients, frequently in emerging markets. During the third quarter, we won a number of key new accounts and made great progress on the integration of our product lines and acquired businesses -- activities which take time to develop and will bear financial fruit in future quarters."

"We started 2008 at an annualized revenue run-rate of approximately $12 million," continued Campion. "Even after the appreciation of the dollar in recent months, we are currently operating at an annualized revenue level of approximately $35 million. Looking forward to 2009, we will continue to leverage our first-mover advantage as the only truly device-agnostic IP video solutions provider, able to deliver and manage video on the browser, the mobile device and the IPTV-enabled set-top box or game-box."

Q3 2008 Operational Highlights

--  Signed over 20 new enterprise clients across major geographies --
    Asia/Pacific, Europe, the Middle East & Africa (EMEA), and the Americas;
    
--  Acquired Morpheum, one of Asia's leading providers of web-based
    content management systems -- which is already in the process of being
    integrated with the KIT digital's "VX" video management platform;
    
--  Created a critically acclaimed, custom-built Web environment for TV
    innovator Seth MacFarlane and his new collection of web shorts, titled
    'Seth MacFarlane's Cavalcade of Cartoon Comedy';
    
--  Launched a North American IPTV set-top box deployment for TV2Moro, a
    new company created by leading players in Arab media production and
    distribution;
    
--  RCN, a leading broadcaster in Latin America, choose KIT digital to
    provide a broad range of streaming media initiatives;
    
--  An estimated 91% of KIT digital revenue in the third quarter of 2008
    was generated in the Asia/Pacific and EMEA geographies, and approximately
    9% from the Americas.
    

Conference Call

KIT digital will hold a conference call to discuss Q3 2008 results at 10:00 a.m. Eastern time on Tuesday, November 18, 2008. To participate in the call, please dial +1 (800) 288-8968 (North America) or +1 (612) 332 0725 (outside of North America). Note that the call-in numbers have changed since the company's last press release; the previously disseminated call-in numbers will be answered and forwarded to the numbers above.

Please dial into the call five minutes prior to the scheduled start time. If you have any difficulty connecting to the conference call, please contact the Liolios Group at +1 (949) 574-3860.

For interested individuals unable to join the live conference call, a replay of the call will be available an hour after the conclusion of the live call through December 2, 2008 by dialing into +1 (800) 475-6701 (North America) or +1 (320) 365-3844 (outside of North America). The access code for this replay is 970370. In addition, an online archive of the call will be available for 30 days afterwards through the Investor Relations section of the Company's website at www.kitd.com.

About KIT digital

KIT digital, Inc. (OTCBB: KITD) is a leading, global provider of proprietary IP-based video enablement technologies and video-centric interactive marketing solutions. Through its end-to-end platform, KIT digital works closely with consumer brands, content providers and telcos to maximize the value of video content via the Internet, mobile networks and IPTV set-top boxes. The KIT VX platform allows clients to publish, manage and distribute digital video content, build online/mobile communities and integrate advertising. KIT offers businesses a full range of interactive marketing solutions and KIT clients can access approximately 100 KIT-syndicated channels and 40,000 KIT-syndicated videos. KIT digital clients include ABC Disney, Associated Press, China Mobile, General Motors, IMG, Kmart, NASDAQ, News Corp, RCS, Telefonica and Verizon. KIT digital has principal offices in Dubai, Melbourne (Australia), Prague, Stockholm, New York and London. For additional information, visit www.kit-digital.com.

Forward-Looking Statements

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" or similar expressions. 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, Inc. 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)


                                              September 30,  December 31,
                                                  2008         2007 (A)
                                              -------------  -------------
                                               (Unaudited)
Assets:
Current assets:
   Cash and cash equivalents                  $       6,069  $      10,189
   Accounts receivable, net                           4,583          3,057
   Other current assets                               1,690          1,288
   Restricted cash                                        -            100
                                              -------------  -------------
   Total current assets                              12,342         14,634

Property and equipment, net                           1,621          1,307
Deferred tax assets                                     254            263
Software, net                                         2,310            505
Customer list, net                                    2,212            253
Domain names, net                                        22             30
Goodwill                                              9,809          1,123
                                              -------------  -------------
   Total assets                               $      28,570  $      18,115
                                              =============  =============

Liabilities and Stockholders' Equity:
Current liabilities:
   Bank overdraft and other obligations       $         260  $         190
   Accounts payable                                   3,081          3,121
   Accrued expenses                                   2,665          1,616
   Income tax payable                                   188            139
   Acquisition liability - Kamera                     3,000              -
   Liability to KIT Media, Ltd.                       2,500              -
   Other current liabilities                          2,156          1,478
                                              -------------  -------------
   Total current liabilities                         13,850          6,544

Capital lease obligations                               207            292
                                              -------------  -------------
   Total liabilities                                 14,057          6,836
                                              -------------  -------------
Commitments                                               -              -
                                              -------------  -------------
Minority interest                                      (122)           (76)
                                              -------------  -------------

Stockholders' equity:
   Series A preferred shares, $0.0001 par
    value: authorized 0 and 10,000,000
    shares; issued and outstanding 0 and
    10,000,000 at September 30, 2008 and
    December 31, 2007                                     -              1
   Common stock, $0.0001 par value:
    authorized 500,000,000 shares; issued
    and outstanding 114,602,447 and
    38,936,039 at September 30, 2008 and
    December 31, 2007, respectively                      11              4
   Additional paid-in capital                        94,846         74,820
   Accumulated deficit                              (80,036)       (63,524)
   Accumulated other comprehensive (loss)
    income                                             (186)            54
                                              -------------  -------------
   Total stockholders' equity                        14,635         11,355
                                              -------------  -------------
   Total liabilities and stockholders' equity $      28,570  $      18,115
                                              =============  =============

(A) - Reference is made to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2007 filed with the Securities and Exchange
Commission in April 2008.




                   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       Nine months ended
                                September 30,           September 30,
                           -----------------------  ----------------------
                              2008         2007        2008        2007
                           -----------  ----------  ----------  ----------
Revenue                    $     5,381  $    3,434  $   14,368  $   10,020
                           -----------  ----------  ----------  ----------

  Variable and direct third
   party costs:
    Hosting, delivery and
     reporting                     499         509       1,601       1,782
    Content costs                  866         346       1,685       1,259
    Direct third party
     creative production
     costs                         759         777       2,732       2,203
                           -----------  ----------  ----------  ----------
    Total variable and
     direct third party
     costs                       2,124       1,632       6,018       5,244
                           -----------  ----------  ----------  ----------

    Gross profit                 3,257       1,802       8,350       4,776

  General and administrative
   expenses:
    Compensation, travel
     and associated costs
     (exclusive of non-cash
     stock-based
     compensation)               3,701       6,621      12,108      18,173
    Non-cash stock-based
     compensation                  188       1,177       4,262       3,656
    Legal, accounting, audit
     and other professional
     service fees                  291         783         905       1,313
    Office, marketing and
     other corporate costs         834       1,042       2,600       3,258
    Depreciation and
     amortization                  434         661       1,033       1,043
    Restructuring charges          162           -       3,053           -
    Other non-recurring
     charges                       200           -         845           -
    Impairment of property
     and equipment                   -           -         228           -
                           -----------  ----------  ----------  ----------
    Total general and
     administrative
     expenses                    5,810      10,284      25,034      27,443
                           -----------  ----------  ----------  ----------

    (Loss) from operations      (2,553)     (8,482)    (16,684)    (22,667)

  Interest income                   37         262         127         594
  Interest expense - other         (31)        (18)        (85)        (51)
  Other income                       8           9         140          29
                           -----------  ----------  ----------  ----------

    Net (loss) before
     income taxes               (2,539)     (8,229)    (16,502)    (22,095)

  Income tax
   (expense) benefit                (1)          -          (2)          5
                           -----------  ----------  ----------  ----------

    Net (loss) before
     minority interest          (2,540)     (8,229)    (16,504)    (22,090)

  Minority interest                (15)         17          (8)        (11)
                           -----------  ----------  ----------  ----------

    Net (loss) available to
     common shareholders   $    (2,555) $   (8,212) $  (16,512) $  (22,101)
                           ===========  ==========  ==========  ==========

  Basic and diluted net
   (loss) per common share $     (0.02) $    (0.21) $    (0.21) $    (0.66)
                           ===========  ==========  ==========  ==========
  Weighted average common
   shares outstanding      114,557,722  38,907,293  78,895,542  33,388,117
                           ===========  ==========  ==========  ==========

  Comprehensive (loss):
    Net (loss)             $    (2,555) $   (8,212) $  (16,512) $  (22,101)
    Foreign currency
     translation                  (219)         61        (240)         80
                           -----------  ----------  ----------  ----------
    Comprehensive (loss)   $    (2,774) $   (8,151) $  (16,752) $  (22,021)
                           ===========  ==========  ==========  ==========

Contact Information

  • Investor Relations Contact:
    Ron Both
    Liolios Group
    Tel. +1-949-574-3860
    Email Contact

    Media Contact:
    Jonathan Cutler
    Verse Communications
    Tel. +1.818.981.3023
    Email Contact