"KIT digital Reports Record Operating Results and New Client Contracts in Third Quarter 2009
Revenue Up 104% Year-Over-Year to $11 Million, Operating EBITDA of $927,000, or $0.14 per Share
NEW YORK, NY and PRAGUE, CZECH
REPUBLIC, Nov 19, 2009 (MARKETWIRE via COMTEX) -- KIT digital, Inc. (NASDAQ: KITD), a leading global provider of on-demand software solutions for managing and monetizing Internet Protocol (IP)-based video assets, reported record financial results and new client contracts for the third quarter ended September 30, 2009. (Financial results are quoted in U.S. dollars, although a material portion of the company's revenue is earned in other currencies.)
Revenue in the third quarter of 2009 increased 5% to a record $11.0 million from $10.5 million in the previous quarter, and increased 104% from $5.4 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.
After recognizing the non-cash accounting impact of accounting standard ASC 815-40, net loss for the third quarter of 2009 was $11.1 million or $(1.65) per basic and diluted share, compared to an adjusted net loss in the previous quarter of $1.6 million or $(0.37) per basic and diluted share, and a net loss in the third quarter of 2008 of $2.6 million or $(0.78) per basic and diluted share (please see the important discussion about the new accounting standard in the section, "About New Accounting Standard," below). Net loss for the third quarter 2009 included a non-cash derivative expense of $8.4 million resulting from the application of the new accounting standard, $1.5 million in non-cash charges (including $536,000 in stock-based compensation); $981,000 in restructuring and non-recurring charges primarily related to employee termination, acquisition-related facility closing costs, and other costs related to the reorganization and integration of acquired companies; and $522,000 in merger and acquisitions and investor relation related expenses. It is important to note that the application of the new accounting standard resulted in adjusted non-cash derivative income of $10.2 million in the first quarter of 2009, which will be recognized in the company's full-year 2009 reporting.
Operating EBITDA, a non-GAAP term, increased 38% in the third quarter of 2009 to a record $927,000 or $0.14 per basic and diluted share from $671,000 or $0.16 per basic and diluted share in the previous quarter, and improved from an operating EBITDA loss of $1.6 million or ($0.48) per basic and diluted share in the third quarter of 2008. The company defines operating EBITDA as earnings before non-cash 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).
Cash and cash equivalents at September 30, 2009 totaled $13.5 million, as compared to $5.9 million at December 31, 2008. As of November 16, 2009, the company had an estimated net outflow of $5.7 million in purchase consideration and subsequent restructuring charges related the acquisitions of Nunet A.G. and The FeedRoom, Inc. In October 2009, KIT digital acquired Nunet and The FeedRoom, which added more than 100 global enterprise clients and are expected to add $17.5 million of current, annualized revenues from core IP video-based services, and more than $4.5 million in annualized EBITDA.
Simultaneous with the acquisitions of Nunet and The FeedRoom, KIT digital reached an agreement to extinguish past and future contingent earn-out obligations related to the May 2008 acquisitions of Kamera Content AB comprising a total cash payment of $1.7 million and the issuance of 110,805 restricted shares to the former shareholders of Kamera. An additional cash payment of $0.3 million and issuance of 52,632 shares were made to the former shareholders of Visual Connection, a.s., in fulfillment of earn-outs related to the October 2008 acquisition of Visual. Neither the Nunet nor The FeedRoom acquisitions involved any earn-out or contingent liabilities.
As of November 16, 2009 and after giving full effect for all equity issuances related to the acquisitions of Nunet and The FeedRoom, earn-out payments and settlements as described above, and the exercise of certain warrants by investors, the company had approximately 10.7 million common shares outstanding.
All the warrants applied to the new accounting standard, as described above, are cash-exercise in nature. The company is considering repurchasing or otherwise eliminating these warrants in order to ameliorate or eliminate the effect of future applications of the standard."
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