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KIT digital Reports Q1 2012 Results In Line With Preliminary Q1 2012 Announcement

Provides Operational Update and Announces $29.2 Million Capital Raise to Support Global Tier One Customer Strategy (May 15, 2012)

NEW YORK, NY -- (Marketwire) -- 05/15/12 -- KIT digital, Inc. (NASDAQ: KITD), a leading video management software and services company, today reported first quarter results for the period ended March 31, 2012 that were in line with preliminary figures announced on May 3, 2012. The company also reported a number of strategic and operational initiatives in support of targeted growth, improved financial controls and a strengthened balance sheet, including the completion of a $29.2 million common equity placement.

"During my first 45 days as CEO we have conducted a thorough strategic and operational review of our business," said Barak Bar-Cohen, CEO. "Based on this assessment, we have thus far taken definitive steps to support our operating plan and improve financial controls. This includes raising capital to support our updated operational plan and global commercial strategy. Going forward, we intend to sharpen our focus on tier one video management software and services, which we believe will result in significantly higher cash flow levels by the end of 2012."

Q1 2012 Results
First quarter 2012 revenues were $59.0 million, compared to $70.0 million in the preceding quarter and $34.5 million for the first quarter of 2011. Non-GAAP operating loss was $8.0 million, compared to non-GAAP operating income of $16.5 million in the preceding quarter and $7.1 million of non-GAAP operating loss for the first quarter of 2011.

First quarter GAAP net loss was $24.9 million or $0.53 per share, compared to GAAP net income of $0.4 million or $0.01 per share in the preceding quarter and GAAP net loss of $12.5 million or $0.34 per share in the first quarter of 2011. Free cash flow from operations was a negative $12.9 million, compared to a positive $1.3 million in the previous quarter, and a negative $10.2 million in the first quarter of 2011.


Cash and cash equivalents at March 31, 2012 totaled $26.1 million, compared to $45.7 million on December 31, 2011. The decrease in Q1 was primarily attributable to one-time residual payments of consideration for acquisitions closed in Q4; higher than usual legal, accounting and audit costs associated with corporate development activity; post-consolidation integration costs; and other cash requirements of the business during the quarter, which were in line with previous quarters.

Operational Update
The company has undertaken a number of initiatives that support our focus on providing video management software and services to tier one customers around the world. They include:

  • Hiring of additional commercial and deployment resources in the high growth areas of Latin America and South East Asia;
  • Prioritization of development resources to the Cosmos platform, the technology product which caters to the needs of tier one customers;
  • Planned divestiture of non-core business lines: content solutions, digital marketing, and lower-margin broadcast systems integration; and
  • Transition of company's current CFO, Robin Smyth, into a Corporate Development role, and the initiation of a search for a new CFO.

Improving Financial Controls and Reporting
The company has taken the following steps in light of the recently identified material weakness in financial controls and reporting:

  • The company has hired a new Corporate Controller based in New York;
  • The company has hired a new Head of Internal Audit based in New York;
  • The company has retained one of the Big Four accounting firms to advise on the implementation of best-practice governance and monthly close policies, as well as to provide advice on the ongoing implementation of Netsuite to manage financial controls and processes; and
  • The company has appointed HSBC as global financial services partner to implement cash management and pooling functions.

Important New Contracts in Q1 2012

  • VRT, the large Belgian broadcaster, extended its contract for the provision of online streaming and video-on-demand services;
  • Sky Italia, the Italian digital television provider, selected the Cosmos platform to run all of its online video delivery services, mirroring recent similar moves by Sky Germany and Sky UK;
  • BSkyB, the British satellite broadcasting and broadband services company, announced the launch of its Sky Now service in the UK, which will run on the Cosmos platform;
  • One of Latin America's leading pay-TV providers will deploy their "TV Everywhere" service over the Cosmos platform;
  • Voice of America, the multimedia broadcaster providing news broadcasts to an international audience, extended its contract;
  • A major telecommunications company in South East Asia chose the company to provide an over the top, multi-device video service through the Cosmos platform and Connected Device Framework; and
  • The company signed software license deals with a number of other well-known brands, including: Alstom, AXA, Total, Air France, and LVMH Hennessy.

Completed Capital Raise
The company also announced that it has raised gross proceeds of approximately $29.2 million through the sale of common stock. The Company issued to investors 7.0 million shares of common stock priced at $4.17 per share. Investors also received warrants to acquire 5.25 million shares of common stock at an exercise price of $5.00 per share. Cannacord Genuity Inc. acted as sole placement agent.

FY 2012 Updated Outlook
For 2012, the company is setting a baseline revenue expectation at $250 million with non-GAAP operating income margins trending toward previous levels in the second half of the year. The company expects to begin generating positive free cash flow from operations no later than the fourth quarter of this year. This outlook is dependent on the company's ongoing strategic review of its business lines and contractual relationships with its customers, and the company intends to provide a more complete outlook in due course upon completion of its comprehensive analysis.

"Over the last several months, we have observed an increase in RFPs issued by major broadcasters and network operators around the world. In each of these opportunities, it is clear that our unique combination of broadcast-grade video management software, world-class professional services, and years of deployment experience is our major point of differentiation," Bar-Cohen said. "With the capital raise and key initiatives announced today, we can now execute on these opportunities and build a growing and cash-generating business."

Conference Call
KIT digital's executive management team will host a conference call to discuss its first quarter 2012 results today (May 15, 2012) at 5:00 p.m. Eastern time. To access the conference call, please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

Date: Tuesday, May 15, 2012
Time: 5:00 p.m. Eastern time
Dial-in # (North America): +1-877-941-1430
Dial-in # (outside of North America): +1-480-629-9858
Conference ID: 4539178

A live webcast of the call will be available from the Investor Relations section of the Company's corporate website at ir.kitd.com and via replay beginning approximately two hours after the completion of the call. In addition, a replay of the call will be available after 8:00 p.m. Eastern time today and until June 15, 2012.

Toll-free replay # (North America): +1-877-870-5176
International replay # (outside of North America): +1-858-384-5517
Replay pin number: 4539178

About KIT digital, Inc.
KIT digital (NASDAQ: KITD) is a leading video technology and related services company. The KIT Video Platform, the company's cloud-based video asset management system, enables enterprise, media & entertainment and network operator clients to produce, manage and deliver multiscreen socially-enabled video experiences to audiences wherever they are. KIT digital services nearly 2,500 clients in 50+ countries including some of the world's biggest brands, such as Airbus, The Associated Press, AT&T, BBC, BSkyB, Disney-ABC, Google, HP, Mediaset, MTV, News Corp, RCS MediaGroup, Sky Deutschland, Sky Italia, Telecom Argentina, Telecom Italia, Telefonica O2, Universal Studios, Verizon, Vodafone and Volkswagen. KIT digital maintains executive headquarters in New York and operational headquarters in Prague, with offices in 21 countries around the world. Visit the company at www.kitd.com or follow on Twitter at www.twitter.com/KITdigital

About Presentation of Non-GAAP Metrics
Non-GAAP metrics referred to herein include non-GAAP operating income and free cash flow. The company defines non-GAAP operating income as earnings before non-cash derivative income/loss, non-cash stock-based compensation, impairment of property and equipment, merger and acquisition expenses, restructuring and integration expenses, depreciation and amortization, interest income and expense, income taxes and other income and expenses. Company references to free cash flow generated during completed periods refer to actual cash flow from operations less capital expenditures. None of these metrics are 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. Other companies (including the company's competitors) may define these metrics differently. The company presents these metrics because it believes them to be important supplemental measures of performance. Management also uses some of 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.

Important Cautions Regarding 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," "estimates," "expects," "intends," "anticipates," "will continue," "projects," "plans" and variations of such words or similar expressions, but their absence does not mean that the statement is not forward-looking. Statements in this announcement that are forward-looking include, but are not limited to, statements made by management regarding estimated levels of revenues and non-GAAP operating income in the second quarter and full year of 2012, estimated capital expenditures as a percentage of revenues, and anticipated organic annual growth rate. Such forward-looking statements involve known and unknown risks and uncertainties, including uncertainties relating to product development and commercialization, integration of acquired businesses, 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. 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. Except as required by U.S. federal securities laws, 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.

Three months ended March 31 ---------------------------- 2012 2011 ------------- ------------- Revenue $ 59,030 $ 34,450 ------------- ------------- Variable and direct third party costs: Cost of goods and services (exclusive of depreciation shown separately below) 19,772 10,747 Hosting, delivery, reporting and content costs 3,434 1,362 Direct third party creative production costs 617 365 ------------- ------------- Total variable and direct third party costs 23,823 12,474 ------------- ------------- Gross profit 35,207 21,976 ------------- ------------- General and administrative expenses: Compensation, travel and associated costs (including non-cash stock-based compensation of $7,303 and $2,027, respectively) 42,267 12,307 Legal, accounting, audit and other professional service fees 1,187 637 Office, marketing and other corporate costs 7,031 3,991 Merger and acquisition and investor relations expenses 4,490 5,250 Depreciation and amortization 4,221 2,434 Restructuring charges - 3,318 Integration expenses - 8,688 Total general and administrative expenses 59,196 36,625 ------------- ------------- Loss from operations (23,989) (14,649) ------------- ------------- Interest income 53 72 Interest expense (690) (270) Amortization of deferred financing costs and debt discount (104) (19) Derivative income 187 2,610 Other (expense) income (278) (106) ------------- ------------- Net loss before income taxes (24,821) (12,362) Income tax expense (61) (139) ------------- ------------- Net loss available to common shareholders $ (24,882) $ (12,501) ============= ============= Basic and diluted net income (loss) per common share $ (0.53) $ (0.34) ============= ============= Basic and diluted weighted average common shares outstanding 46,709,193 36,573,031 ============= ============= Comprehensive loss: Net loss $ (24,882) $ (12,501) Foreign currency translation 1,549 858 Change in unrealized gain on investments, net 47 49 ------------- ------------- Comprehensive loss: $ (23,286) $ (11,594) ============= ============= March 31, December 31, 2012 2011 ------------- ------------- Assets: Current assets: Cash and cash equivalents $ 26,099 $ 45,660 Restricted cash 247 238 Investments 2,047 1,915 Accounts receivable, net 73,071 73,970 Unbilled revenue 20,761 13,899 Inventory, net 2,534 1,338 Loan receivable, current portion 3,434 2,756 Deferred tax assets, current portion 399 399 Other current assets 15,089 11,350 ------------- ------------- Total current assets 143,681 151,525 ------------- ------------- Property and equipment, net 11,958 12,070 Loan receivable, net of current 5,198 5,876 Deferred tax assets, net of current 665 600 Intangible assets 62,020 64,835 Goodwill 263,274 263,274 ------------- ------------- Total assets $ 486,796 $ 498,180 ============= ============= Liabilities and Stockholders' Equity: Current liabilities: Capital lease and other obligations, current portion $ 141 $ 171 Secured notes payable, net of debt discount, current portion 7,039 6,406 Notes payable 575 2,525 Accounts payable 22,611 18,245 Accrued expenses 12,349 6,763 Deferred revenue 5,474 5,083 Income tax payable 1,099 1,207 Deferred tax liability, current portion 344 344 Acquisition liabilities, current portion 33,718 16,952 Derivative liability 370 557 Other current liabilities 21,498 26,694 ------------- ------------- Total current liabilities 105,218 84,947 Capital lease and other obligations, net of current 84 91 Secured notes payable, net of current 10,013 11,868 Deferred tax liability, net of current 12,115 11,747 Acquisition liabilities, net of current 14,400 35,857 ------------- ------------- Total liabilities 141,830 144,510 ------------- ------------- Equity: Stockholders' equity: Common stock, $0.0001 par value: authorized 150,000,000 shares; issued and outstanding 47,443,040 and 46,342,851, respectively 5 5 Additional paid-in capital 528,464 513,882 Accumulated deficit (181,208) (156,326) Accumulated other comprehensive income (loss) (2,295) (3,891) ------------- ------------- Total stockholders' equity 344,966 353,670 ------------- ------------- Total liabilities and stockholders' equity $ 486,796 $ 498,180 ============= ============= GAAP to non-GAAP Reconciliation Three months ended (amounts in thousands) March 31, ---------------------------- 2012 2011 ------------- ------------- Consolidated Statement of Operations Reconciliation Net loss on a GAAP basis $ (24,882) $ (12,501) Non-cash stock-based compensation 7,303 2,027 Merger and acquisition and investor relations expenses 4,490 5,250 Depreciation and amortization 4,221 2,434 Restructuring charges - 3,318 Integration expenses - 8,688 Interest income (53) (72) Interest expense 690 270 Amortization of deferred financing costs 104 19 Derivative income (187) (2,610) Other (income) expense 278 106 Income tax expense 61 139 ------------- ------------- Non-GAAP Operating (loss) income $ (7,975) $ 7,068 ============= ============= Consolidated Statement of Operations Reconciliation per Share Basic net loss per share on a GAAP basis $ (0.53) $ (0.34) Non-cash stock-based compensation 0.15 0.05 Merger and acquisition and investor relations expenses 0.10 0.14 Depreciation and amortization 0.09 0.07 Restructuring charges - 0.09 Integration expenses - 0.24 Interest income - - Interest expense 0.01 0.01 Amortization of deferred financing costs - - Derivative income - (0.07) Other (income) expense 0.01 - Income tax expense - - ------------- ------------- Non-GAAP Operating (loss) income per share $ (0.17) $ 0.19 ============= ============= Basic weighted average common shares outstanding 46,709,193 36,573,031 ============= =============

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KIT digital Media Contact:
Daniel Goodfellow
SVP, Global Marketing and Communications
Tel. +1-917-513-6081
Email Contact

KIT digital Investor Contact:
Murray Arenson
SVP, Corporate Initiatives & Investor Relations
Tel. +1-646-553-4900
Email Contact


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