SOURCE: KIT digital, Inc.
March 16, 2011 10:00 ET
KIT digital Reports Record Fourth Quarter and Fiscal 2010 Results
Annual Revenue Up 125% to Record $106.6 Million, Driving Record Operating EBITDA of $18.3 Million or $0.85 per Share
PRAGUE, CZECH REPUBLIC and NEW YORK, NY--(Marketwire - March 16, 2011) - KIT digital, Inc.
(NASDAQ: KITD), a premium provider of video asset management software and
related services (VAMS) for multi-screen and socially-enabled Internet
Protocol (IP) video delivery, reported financial results for the fourth
quarter and year ended December 31, 2010. All figures below are reported in
U.S. dollars.
Revenue in the fourth quarter of 2010 increased 39% to a record $38.4
million from $27.7 million in the previous quarter, and increased 138% from
$16.1 million in the same quarter a year ago. For the full year 2010,
revenue increased 125% to a record $106.6 million from $47.3 million in
2009. The company's revenues were comprised of software-as-a-service (SaaS)
license and usage fees, software maintenance fees, software set-up fees,
and professional services charges.
KIT digital added a record 58 net new client contracts during the fourth
quarter, with estimated average monthly revenue per client (ARPU) in excess
of $30,000, reflecting the company's ongoing focus on higher-end
opportunities in the market and large, multi-year contracts in emerging
sectors and geographies. The company's client base totals more than 2,000
customers across more than 40 countries.
For the fourth quarter of 2010, GAAP net loss was $8.5 million or $(0.31)
per basic and diluted share, compared to a net loss in the previous quarter
of $8.0 million or $(0.34) per basic and diluted share, and a net loss in
the fourth quarter of 2009 of $15.6 million or $(1.50) per basic and
diluted share.
GAAP net loss for the fourth quarter 2010 included $6.4 million in non-cash
charges comprised of $1.8 million in stock-based compensation; $2.2 million
of depreciation and amortization, and a non-cash derivative loss of $2.4
million. Q4 GAAP net loss also included $5.7 million in integration
expenses related to the reorganization and integration of recently acquired
companies, and $2.0 million in merger and acquisitions expenses, including
investment banking advisory and legal fees.
For the full year 2010, GAAP net loss was $35.3 million or $(1.63) per
basic and diluted share, compared to a net loss of $19.9 million or $(3.03)
per basic and diluted share in 2009.
GAAP net loss for the full year 2010 included $26.0 million in non-cash
charges, including $4.7 million in stock-based compensation; $8.4 million
of depreciation and amortization; and a non-cash derivative loss of $12.9
million. GAAP net loss for the year also included $19.9 million in
restructuring and integration expenses related to the reorganization and
integration of acquired companies -- including employee termination,
facilities closures, contract terminations and transition agreements -- and
$5.4 million in merger and acquisitions expenses, including investment
banking advisory and legal fees.
For the fourth quarter 2010, operating EBITDA, a non-GAAP metric which
management uses as a proxy for operating cash-flow, increased 53% to a
record $6.7 million or $0.25 per basic and diluted share from $4.4 million
or $0.19 per basic share in the previous quarter, and increased 114% from
$3.2 million or $0.30 per basic and diluted share in the same year-ago
quarter.
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).
For the full year 2010, operating EBITDA was a record $18.3 million or
$0.85 per basic and diluted share, an increase of 270% from $4.9 million or
$0.75 per basic and diluted share in 2009.
Cash and cash equivalents at December 31, 2010 totaled $141.2 million, as
compared to $50.1 million at September 30, 2010. As of March 15, 2011, the
company has approximately $115 million of cash and cash equivalents and
approximately 37.9 million shares outstanding.
Day sales outstanding ("DSOs") at December 31, 2010 were 79 days, which is
consistent with the company's historical and projected DSO levels of
between 75-90 days, and which the company believes is consistent with other
SaaS companies with large enterprise customers.
Revenue from the company's Europe, Middle East & Africa (EMEA) region
constituted approximately 45% of the total during the fourth quarter, with
approximately 35% from Asia-Pacific and 20% from the Americas. For the full
year 2010, approximately 54% of revenues came from Europe, Middle East &
Africa (EMEA), with approximately 25% from Asia-Pacific and 21% from the
Americas.
Q4 2010 Selected Client Wins
- Getty Images, a leading creator and distributor of digital media, is
leveraging KIT digital's platform to localize, edit, package and distribute
Getty's entertainment video content to users around the globe via multiple
screens, including browser-based, mobile and tablet devices, as well as
IP-enabled TVs.
- Sony Pictures, a leading Hollywood studio, selected KIT digital to
provide interactive video capabilities to promote films using
user-generated and other social media tools.
- Diageo, the world's leading premium drinks business, selected KIT
digital to provide interactive and social media-focused video capabilities,
starting with its Captain Morgan brand.
- eTV, South Africa's largest commercial television broadcaster, selected
KIT digital to design and integrate a new state of the art tapeless
play-out system in its broadcast facility.
- Goldman Sachs London, a global investment banking and securities firm,
extended its relationship with KIT digital to implement its next generation
broadcast and video conference capabilities.
- Penguin Books, one of the largest English language book publishers in
the world, selected KIT digital to support a customized social media and
community platform.
- The VCE Coalition (Virtual Computing Environment), which consists of
EMC, Cisco and VM Ware, selected KIT digital's platform and professional
services team to support VCE Coalition communications.
- Altera, one of the leading custom logic solutions chip manufacturers,
chose KIT digital's platform to manage and self-publish video content,
expand their product training program and deliver in depth multimedia
product demo content that they can deploy as educational content.
- CME, a subsidiary of United Business Media and a leading provider of
Continuing Medical Education programs, selected KIT digital's platform and
professional services team to power its content management and
distribution.
- Al Aan TV, a Middle Eastern TV broadcaster, chose KIT digital's
solutions to automate the export of news bulletins from its broadcast
system to various IP publishing points. KIT digital extends Al Aan's
existing workflow from its current hardware-based infrastructure.
- Intellisphere/HCP Live, a leading destination site for physicians,
pharmacists, managed care executives and other healthcare professionals,
selected KIT digital to manage and deliver IP-based multimedia assets with
integrated advertising features.
Management Commentary
"Our record fourth quarter and full year 2010 results reflect our continued
focus on new sales, while taking advantage of upselling and cross-selling
opportunities in our existing client base, as we continue to harness the
high growth in IP video across all major global markets," said Kaleil Isaza
Tuzman, KIT digital's chairman and CEO.
"In 2010, we achieved the operational and financial targets we set out for
ourselves now for the third consecutive year since new management joined
the company. We are now the largest player in the IP VAMS industry in terms
of revenue, operating cash flow, geographical reach, and corporate clients,
and we have the broadest and deepest overall product and technology suite
that exists in the marketplace. Our full suite of platform solutions with
wrap-around professional services uniquely positions us to deliver truly
complete video solutions, from the lens of the camera to the eye of the
audience, or 'lens to lens.'"
Gavin Campion, KIT digital's president, commented: "As of January 1, 2011,
we have aligned our business into three client vertical segments: media
distributors, network operators and non-media enterprises. We believe this
will provide an organizational framework to synchronize commercial and
operational functions and will support the ongoing development of solutions
that address the specific workflow needs of particular industries."
"We see extensive cross-selling opportunities in our newly expanded client
base from recent acquisitions," continued Campion, "and have begun to mine
the potential of the new social media tools, mobile publishing features,
and the behind-the-firewall and digital signage capabilities they have
contributed."
"The fourth is always our strongest quarter, and there is typically some
seasonality going into Q1 as is found throughout the digital media
industry. However, we are seeing less of this seasonality in the current
quarter than we have historically as a result of new client wins,
up-selling and cross-selling with newly acquired client bases and
solutions, and other factors.
"We are excited about 2011 and as we advance through this year we will
continue to judiciously invest in additional above-the-line resources in
direct sales, channel sales, deployment and product development to support
our long-term growth, while rationalizing costs wherever possible."
Growth Outlook
The company issues financial guidance once per year on an organic basis,
which for 2011 was provided in November 2010. In November, management
stated it expected revenue in excess of $137.5 million for fiscal 2011,
with an EBITDA margin of approximately 24%. This guidance was issued prior
to any additional acquisition activity, including KickApps, Kewego, and
Kyte completed in January, and also Polymedia, which is being announced
today and is expected to close in late April 2011.
Isaza Tuzman commented: "If you overlay our organic, pre-acquisition
revenue target of $137.5 million with the estimated annualized run-rate of
recently acquired companies -- totaling around $44 million -- and adjust
for the approximate date of closing and any seasonality for each -- it
provides for an expectation of revenues in 2011 in excess of $170 million,
or up more than 60% percent over 2010.
"While we expect Polymedia to enhance our overall EBITDA margin over time,
there will be upfront operational adjustments to be made. So, adjusting for
the Polymedia acquisition, we see an overall EBITDA margin of approximately
23% in 2011. This will represent a 500 basis point improvement in EBITDA
margin over 2010, while growing revenues materially and without sacrificing
our continued investment in sales and marketing."
The company sees the BRIC markets continuing to be a strong growth driver
and a major strategic focus for KIT digital in 2011. "We are already very
strong in areas like India, Southeast Asia and Eastern Europe, and have
recently made significant headway into China," said Isaza Tuzman. "So,
further expansion into Brazil and Greater China is an objective for 2011,
as is increased presence in Northeast Asia and Russia."
In addition to geographic expansion, the company sees great opportunities
for growth in specialized client verticals undergoing major transitions to
IP-based video workflow, which includes MSOs and telco operators and sports
associations.
"We see great opportunity in the sports vertical," noted Campion, "which is
one of the top content verticals globally. We plan to increase our activity
in this vertical in 2011 and 2012."
Strategic M&A Outlook
Through both organic growth and selective acquisitions, the company aims to
extend its industry leadership position from a current estimated 30%-plus
global market share to a market share level approaching 50% over the next
12-18 months.
The company purposefully sequenced the KickApps, Kewego, Kyte, and
Polymedia transactions, and the majority of the proceeds from the December
2010 public equity offering continue to be dedicated to support a
prospective larger acquisition in the very near future. KIT digital plans
to release news regarding this larger transaction by the end of Q1 or in
early April.
"We had an extremely productive quarter with respect to corporate
development, with the addition of well over $20 million in recurring SaaS
revenue across our three regions, best of breed technology, and global 1000
customers across our key verticals. Additionally, we believe the new
management and foundational technology that was obtained by our acquisition
activity over the first several months of this year was best put in place
first -- as a support to the client migration and staff integration
processes involved with a larger target.
"With the acquisition of Polymedia today and our other planned acquisition
activity in the pipeline, we should reach a level at or close to the
overall market share target we have set out for ourselves. Thus, we intend
to complete the 'consolidation phase' of our strategic plan during the
course of 2011, moving us into a phase of corporate development in 2012 and
beyond which is centered solely on organic growth. By the end of the
current year, we anticipate having cycled through all the necessary
restructuring and integration costs from acquisitions, allowing us to
harmonize EBITDA and GAAP net income reporting much more closely and take
advantage of material prospective free cash-flow generation. It is our
belief that we can deliver on this plan without raising any additional
equity capital in the public markets."
Conference Call
KIT digital's executive management team will host an online video broadcast
to discuss these fourth quarter and fiscal 2010 results today at 10:30 a.m.
Eastern Time (4:30 p.m. Central European Time). The presentation will be
followed by a question and answer period.
The video webcast will be made available real-time in the Investor
Relations section of the company's website and at
http://kitd.com/ib/2010Q4/. Please visit the website in advance of the
presentation in order to download and install the secure player required
for access.
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 (4:30 p.m. Central European Time)
Dial-in # North America toll-free: +1-800-894-5910
Dial-in # outside of North America: +1-785-424-1052
Please provide the operator the Conference ID: 7KITDIGITAL
If you have any difficulty connecting with the conference call, please
contact Liolios Group at +1-949-574-3860.
The video presentation and Q&A session will be available for replay via the
company's website following the broadcast. An audio replay via telephone
will be available after 1:30 p.m. Eastern Time and until April 16, 2011:
Toll-free replay # (North America): +1-877-870-5176
International replay # (outside of North America): +1-858-384-5517
Replay pin number: 11024
About KIT digital, Inc.
KIT digital (NASDAQ: KITD) is a premium provider of video asset management
software and related services (VAMS) for multi-screen and socially-enabled
Internet Protocol (IP) video delivery. The KIT Platform, the company's
cloud-based solution, enables enterprise, media distributor and network
operator clients to produce, manage and deliver multi-screen video and
social engagement experiences to audiences wherever they are. The
application of the KIT Platform ranges from end-consumer focused video
distribution to internal corporate deployments, including corporate
communications, human resources, training, security and surveillance. KIT
digital's global client base includes approximately 2,000 customers across
40+ countries, including Airbus, American Express, The Associated Press,
BBC, Best Buy, Bristol-Myers Squibb, Disney-ABC, ESPN Star, FedEx, General
Motors, Google, Hewlett-Packard, Home Depot, IMG Worldwide, MediaCorp,
Microsoft, MTV, NBC Universal, News Corp, Telefonica, Verizon, Vodafone and
Volkswagen. KIT digital is operationally headquartered in Prague, and
maintains principal offices in Atlanta, Beijing, Boston, Buenos Aires,
Cairo, Cambridge (UK), Chennai, Cologne, Delhi, Dubai, Kolkata, London, Los
Angeles, Melbourne (Australia), Mumbai, New York (executive office), Paris,
San Francisco, Singapore, Sofia, Stockholm, Taipei and Toronto. For
additional information, visit www.kitd.com or follow the company on Twitter
at www.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. For the third quarter 2010 reconciliation of operating
EBITDA, please refer to the table issued in the Second Quarter 2010 press
released on November 22, 2010, which is available online in the company's
investor relations section, under "Quarterly Results" at www.kitd.com.
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 Reconciliation
(amounts in thousands)(Unaudited)
Three months ended Years ended
December 31, December 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Consolidated Statement of
Operations Reconciliation
Net loss on a GAAP basis $ (8,502) $ (15,592) $ (35,260) $ (19,942)
Non-cash stock-based
compensation 1,796 834 4,705 1,922
Merger and acquisition
and investor relations
expenses 2,037 1,255 5,448 2,506
Depreciation and
amortization 2,258 1,632 8,368 4,202
Restructuring charges - 1,895 3,481 2,549
Integration expenses 5,705 2,797 16,539 4,429
Impairment of intangible
assets 438 500 438 500
Interest income (49) (19) (82) (50)
Interest expense 297 78 860 519
Amortization of deferred
financing costs 19 - 52 1,175
Derivative expense 2,365 8,248 12,891 6,015
Other (income) expense (110) 415 365 10
Income tax expense
(benefit) 494 1,110 518 1,114
---------- ---------- ---------- ----------
Operating EBITDA income $ 6,748 $ 3,153 $ 18,323 $ 4,949
========== ========== ========== ==========
Consolidated Statement of
Operations Reconciliation
per Share
Basic net loss per share on
a GAAP basis $ (0.31) $ (1.50) $ (1.63) $ (3.03)
Non-cash stock-based
compensation 0.07 0.08 0.22 0.29
Merger and acquisition
and investor relations
expenses 0.07 0.12 0.25 0.38
Depreciation and
amortization 0.08 0.15 0.39 0.64
Restructuring charges - 0.18 0.16 0.39
Integration expenses 0.21 0.27 0.77 0.67
Impairment of intangible
assets 0.02 0.05 0.02 0.08
Interest income - - - (0.01)
Interest expense 0.01 0.01 0.04 0.08
Amortization of deferred
financing costs - - - 0.18
Derivative expense 0.09 0.79 0.60 0.91
Other (income) expense (0.01) 0.04 0.01 -
Income tax expense
(benefit) 0.02 0.11 0.02 0.17
---------- ---------- ---------- ----------
Operating EBITDA income per
share $ 0.25 $ 0.30 $ 0.85 $ 0.75
========== ========== ========== ==========
Basic and diluted weighted
average common shares
outstanding 27,537,967 10,409,451 21,586,655 6,573,970
========== ========== ========== ==========
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," "expects", "plans,"
"intends," "anticipates" 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 that
Polymedia is expected to close in late April 2011; the company expects
Polymedia to enhance overall EBITDA margin over time; adjusting for the
Polymedia acquisition, the company sees an overall EBITDA margin of
approximately 23% in 2011; If you overlay the company's organic,
pre-acquisition revenue target of $137.5 million with the estimated
run-rate of recently acquired companies -- totaling around $44 million --
and adjust for the approximate date of closing and any seasonality for each
-- it provides for an expectation of revenues in 2011 in excess of $170
million; the company expects Polymedia to enhance overall EBITDA margin
over time; and with Polymedia the company sees an overall blended EBITDA
margin of approximately 23% in 2011. 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.
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, 2010 December 31, 2009
----------------- -----------------
Assets:
Current assets:
Cash and cash equivalents $ 141,233 $ 6,791
Restricted cash 2,000 -
Investment 1,050 217
Accounts receivable, net 29,349 17,258
Unbilled revenue 537 2,960
Inventory, net 301 708
Loan receivable, current portion 2,486 -
Other current assets 5,104 2,205
----------------- -----------------
Total current assets 182,060 30,139
----------------- -----------------
Property and equipment, net 5,987 5,697
Loan receivable, net of current 8,361 -
Intangible assets 13,248 8,086
Goodwill 89,004 36,492
----------------- -----------------
Total assets $ 298,660 $ 80,414
================= =================
Liabilities and Stockholders'
Equity:
Current liabilities:
Bank overdraft $ - $ 2,944
Capital lease and other
obligations, current portion 608 1,218
Secured notes payable, net of
debt discount, current
portion 1,709 -
Accounts payable 12,740 6,647
Accrued expenses 6,411 8,501
Income tax payable 858 312
Deferred tax liability 682 580
Acquisition liabilities, current
portion 2,115 1,075
Derivative liability 6,096 21,314
Other current liabilities 7,110 3,455
----------------- -----------------
Total current liabilities 38,329 46,046
Capital lease and other
obligations, net of current 175 377
Secured notes payable, net of
current 4,127 -
Acquisition liability, net of
current 10,405 -
----------------- -----------------
Total liabilities 53,036 46,423
----------------- -----------------
Equity:
Stockholders' equity:
Common stock, $0.0001 par value:
authorized 80,000,000 and
30,000,000 shares, respectively;
issued and outstanding
33,196,952 and 10,844,853,
respectively 3 1
Additional paid-in capital 375,578 128,263
Accumulated deficit (129,203) (93,943)
Accumulated other comprehensive
loss (754) (330)
----------------- -----------------
Total stockholders' equity 245,624 33,991
----------------- -----------------
Total liabilities and
stockholders' equity $ 298,660 $ 80,414
================= =================
KIT DIGITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Amounts in Thousands, Except Share and Per Share Data)
(Unaudited)
(Unaudited)
Three months ended Year ended
December 31, December 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Revenue $ 38,432 $ 16,130 $ 106,597 $ 47,284
---------- ---------- ---------- ----------
Variable and direct third
party costs:
Cost of goods and
services 15,165 3,922 37,355 15,584
Hosting, delivery and
reporting 1,400 520 4,435 1,547
Content costs 220 273 966 1,378
Direct third party
creative production
costs 767 670 3,387 3,211
---------- ---------- ---------- ----------
Total variable and direct
third party costs 17,552 5,385 46,143 21,720
---------- ---------- ---------- ----------
Gross profit 20,880 10,745 60,454 25,564
General and administrative
expenses:
Compensation, travel and
associated costs
(including non-cash
stock-based compensation
of $1,796, $834, $4,705
and $1,922,
respectively) 9,496 5,289 31,041 16,309
Legal, accounting, audit
and other professional
service fees 1,225 513 2,870 1,097
Office, marketing and
other corporate costs 5,207 2,624 12,925 5,131
Merger and acquisition
and investor relations
expenses 2,037 1,255 5,448 2,506
Depreciation and
amortization 2,258 1,632 8,368 4,202
Restructuring charges - 1,895 3,481 2,549
Integration expenses 5,705 2,797 16,539 4,429
Impairment of intangible
assets 438 500 438 500
---------- ---------- ---------- ----------
Total general and
administrative expenses 26,366 16,505 81,110 36,723
---------- ---------- ---------- ----------
Loss from operations (5,486) (5,760) (20,656) (11,159)
Interest income 49 19 82 50
Interest expense (297) (78) (860) (519)
Amortization of deferred
financing costs and debt
discount (19) - (52) (1,175)
Derivative expense (2,365) (8,248) (12,891) (6,015)
Other (expense) income 110 (415) (365) (10)
---------- ---------- ---------- ----------
Net loss before income
taxes (8,008) (14,482) (34,742) (18,828)
Income tax expense (494) (1,110) (518) (1,114)
---------- ---------- ---------- ----------
Net loss available to
common shareholders $ (8,502) $ (15,592) $ (35,260) $ (19,942)
========== ========== ========== ==========
Basic and diluted net loss
per common share $ (0.31) $ (1.50) $ (1.63) $ (3.03)
========== ========== ========== ==========
Basic and diluted weighted
average common shares
outstanding 27,537,967 10,409,451 21,586,655 6,573,970
========== ========== ========== ==========
Comprehensive income
(loss):
Net loss $ (8,502) $ (15,592) $ (35,260) $ (19,942)
Foreign currency
translation (1,528) (530) (557) (97)
Change in unrealized gain
on investments, net 42 15 133 17
---------- ---------- ---------- ----------
Comprehensive loss: $ (9,988) $ (16,107) $ (35,684) $ (20,022)
========== ========== ========== ==========