Q1 Revenue Up 174% Year-Over-Year to $9.6 Million; Company Achieves Second Consecutive Quarter of Positive Operating EBITDA
DUBAI, United Arab Emirates, May 19, 2009 - KIT digital, Inc. (OTC BB: KDGL), a leading global provider of Internet Protocol-based video enablement technologies, reported financial results for the first quarter ended March 31, 2009. (These results are quoted in U.S. dollars, although a material portion of the company’s revenue is earned in other currencies. See “Management of International Currency,” below).
Financial Results for Q1 2009
Revenue in the first quarter of 2009 totaled a record $9.6 million, an increase of 7% from $9.0 million in the previous quarter and a 174% increase from $3.5 million in the same quarter a year ago. The company’s revenues are primarily comprised of software license and maintenance fees, software set-up fees, and technical and creative service charges. The year-over-year revenue improvement is principally due to the increase in the number of customers, increased spending by existing customers, and the inclusion of revenue from acquisitions made in 2008.
After recognizing the impact of the application of the new accounting standard EITF 07-05, net income for the first quarter of 2009 was $168,000 or $0.04 per weighted average share outstanding, compared to a loss in the previous quarter of $2.5 million or ($0.75) per weighted average share outstanding and a loss in the first quarter of 2008 of $10.6 million or ($9.57) per weighted average share outstanding. The net income for the first quarter of 2009 includes derivative income of $1.9 million due to EITF 07-05, $963,000 in non-cash charges (including $280,000 in stock-based compensation), $363,000 in restructuring and non-recurring charges related to employee termination and acquisition-related facility closing costs, and $378,000 in acquisitions-related payments and expenses.
EITF 07-05 requires the company to calculate the fair value of warrants containing reset provisions and classify them as derivative liabilities. This liability was recorded at March 31, 2009 at ($3.7) million. A reduction of this liability was recorded in the first quarter of 2009, and this reduction was classified as derivative income.
In the first quarter of 2009, Operating EBITDA, a non-GAAP term, was $198,000 or $0.05 per weighted average share outstanding, as compared to the previous quarter’s Operating EBITDA of $32,000 or $0.01 per weighted average share outstanding and negative Operating EBITDA in the first quarter of 2008 of $3.5 million or ($3.11) per weighted average share outstanding. The company defines Operating EBITDA as earnings before: derivative income/(loss); non-cash stock based compensation; acquisition-related restructuring costs and other non-recurring charges; 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).
The basic and diluted weighted average common shares for the first quarter totaled 4.3 million, as compared to 4.2 million at the end of the previous quarter and 1.1 million at the end of the first quarter of 2008 (all figures reflect the company’s 1-for-35 reverse stock split completed on March 6, 2009).
As of March 31, 2009, the company had cash and cash equivalents of $2.5 million, as compared to $5.9 million at December 31, 2008. The $3.4 million decrease in cash from the previous quarter was largely related to $1,892,000 in investment activities (including $1,512,000 in property and equipment purchases), and $800,000 in deferred consideration and loan re-payments related to the acquisition of Visual Connection, a.s. in October 2008.
In the quarter ended March 31, 2009, there were 463,583 shares issued as a result of deferred equity-based consideration and earn-out payments related to the 2008 acquisitions of Visual Connection and Kamera Content AB. As of May 15, 2008, the company had 4,805,489 shares outstanding.
As of May 18, 2009, there are no additional required cash payments or cash earn-outs related to any acquisitions that the company has made in the past.
Q1 2009 Operational Highlights
• Signed 18 new client contracts across major geographies;
• Completed the first “instance” deployment of the company’s “VX” digital asset management suite, an upfront multi-year enterprise license with video search engine blinkx plc (LSE AIM: BLNX);
• Purchased the remaining 49% interest the company did not already own of its creative services unit, Reality Group Pty Ltd, bringing the company’s ownership to 100%;
• Continued post-acquisition integration of technical operations across Prague, Toronto and Stockholm offices;
• An estimated 95% of KIT digital revenue in the first quarter was generated in the Asia/Pacific and EMEA (Europe, Mid-East, and Africa) regions, and approximately 5% was generated in the Americas.
Management Commentary
“Our first quarter was strong across the board and represents a solid start towards achieving our 2009 objectives,” said Kaleil Isaza Tuzman, chairman and chief executive officer of KIT digital. “In fact, for the first time in many years Q1 exceeded the previous Q4 despite the typical seasonality of our business—where Q1 revenues are typically down around 15% on average relative to Q4, as the result of stronger relative corporate spending and customer usage levels in November and December. Instead, our revenues increased 7% sequentially quarter-over-quarter, reflecting ongoing strength in the IP video segment.”
Gavin Campion, president of KIT digital, added, “We spent last year putting together the building blocks to be the leading ‘3-screen’ IPTV platform provider—online, mobile and set-top box-enabled TV. These building blocks included bringing in new management, cleaning up our capital structure, acquiring Kamera and Visual Connection, and integrating certain disparate elements of our VX enterprise suite. In the first quarter of 2009, we began to reap the rewards from this foundational work, as we continue to solidify our position as the largest independent company in the IP video software platform space.”
Subsequent to the end of the first quarter of 2009, the company acquired certain assets of online TV provider Narrowstep, Inc. and submitted an application for a Nasdaq Capital Markets exchange listing, for which it expects to obtain approval shortly.
Conference Call
KIT digital will hold a conference call to discuss these results at 10:30 a.m. Eastern time on Tuesday, May 19, 2009.The conference call will feature remarks from KIT digital’s executive management team, followed by a question and answer period.
Date: Tuesday, May 19, 2009
Time: 10:30 a.m. Eastern time (7:30 a.m. Pacific time)
Dial-in # (North America): +1-800-895-0198
Dial-in # (outside of North America): +1-785-424-1053
Conference ID: 7KITDIGITAL
Please call the conference telephone number approximately 5-10 minutes before the scheduled start time. If you experience any difficulty connecting with the conference call, please contact the Liolios Group at +1-949-574-3860.
A simultaneous webcast and replay of the call will be accessible via the Investor Relations section of KIT digital’s website at www.kitd.com.A telephone replay of the call will be available for 30 days by dialing + 1-800-283-4783 (North America) or + 1-402-220-0859 (outside of North America).
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 earnings before: derivative income/(loss), non-cash stock based compensation; acquisition-related restructuring costs and other non-recurring charges; 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” below for further information on 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.
