KIT digital Reports First Quarter 2010 Results

Revenue up 80% to Record $17.4 Million, Driving Operating EBITDA of $3.0 Million or $0.21 per Share

PRAGUE, CZECH REPUBLIC, May 17, 2010 (MARKETWIRE via COMTEX) --KIT digital, Inc. (NASDAQ: KITD), the leading global provider of on-demand software solutions for managing and monetizing Internet Protocol (IP)-based video assets, reported financial results for the first quarter ended March 31, 2010.

 

Revenue in the first quarter of 2010 increased 8% to a record $17.4 million from $16.1 million in the previous quarter, and increased 80% from $9.6 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 integration and creative service charges.

 

For the first quarter of 2010, after recognizing the impact of GAAP accounting standard ASC 815-40, net loss was $18.4 million or $(1.33) per basic and diluted share, compared to a net loss in the previous quarter of $15.6 million or $(1.50) per basic and diluted share, and a net income in the first quarter of 2009 of $8.4 million or $1.96 per basic share and $1.88 per diluted share (please see the discussion about important accounting standard in the section, "About ASC 815-40 Accounting Standard," below).

 

Under the terms of the ASC 815-40 standard (which was introduced in 2009), increases in the trading price of the company's common stock during a given financial quarter result in the recognition of a non-cash derivative expense due to an increase in the booked value of the company's outstanding warrants. The company recently entered into agreements to repurchase and cancel the large majority of its outstanding warrants, which is expected to eliminate most of this accounting effect going forward, starting with the current second quarter.

 

Net loss for the first quarter 2010 included a derivative expense of $11.4 million resulting from the application of the ASC 815-40 accounting standard; $2.2 million in non-cash charges, including $552,000 in stock-based compensation; $6.6 million in restructuring and integration expenses primarily related to employee termination, acquisition-related facility closing costs, debt cancellation fees, and other costs directly related to the reorganization and integration of acquired companies and $1.2 million in merger and acquisitions expenses, including legal and auditing fees, and fees to investment banking advisory and intermediaries.

 

Operating EBITDA, a non-GAAP metric which management uses as a proxy for operating cash-flow, was $3.0 million or $0.21 per basic share in the first quarter of 2010, which decreased from $3.2 million or $0.31 per basic share in the previous quarter and increased from $198,000 or $0.05 per basic share in the first quarter of 2009. The company defines operating EBITDA as earnings before derivative income/loss; non-cash stock based compensation; acquisition-related restructuring costs and integration expenses; impairment of property and equipment; direct 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 March 31, 2010 totaled $37.8 million, as compared to $6.8 million at December 31, 2009. The increase was primarily due to the issuance of common stock during the first quarter, offset by payments related to the acquisition of Multicast Media Technologies, including the extinguishment of Multicast's notes payable.

 

KIT digital currently has approximately 23.1 million common shares outstanding, with approximately $67 million in cash on the balance sheet. These figures are pro forma of our April equity offering, the repurchase of outstanding warrants, a "restructuring reserve" for previous acquisitions, and the cash and shares paid as consideration for the recently announced acquisition of Benchmark Broadcast Systems.

 

Management employs a natural hedge by matching as much as possible currencies of client revenues with currencies of associated client delivery costs and as such does not believe there is material currency-related risk in the business.

 

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