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KIT digital Reports Second Quarter 2009 Results

Record Revenue of $10.5 Million, Up 91% Year-Over-Year, With Operating EBITDA of $671,000 or $0.16 per Share, Up 239% Sequentially

NEW YORK, NY and DUBAI, UNITED ARAB EMIRATES -- (Marketwire) -- 08/19/09 -- 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 for the second quarter ended June 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 second quarter of 2009 totaled a record $10.5 million, an increase of 9% from $9.6 million in the previous quarter and a 91% increase from $5.5 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 integration and creative service charges.

Net loss for the second quarter of 2009 was $490,000 or $(0.11) per basic and diluted share, compared to a net income in the previous quarter of $168,000 or $0.04 per basic and diluted share and a net loss in the second quarter of 2008 of $3.3 million or $(1.40) per basic and diluted share.

In the second quarter of 2009, operating EBITDA, a non-GAAP term, totaled a record $671,000 or $0.16 per basic and diluted share, an increase of 239% from $198,000 or $0.05 per basic and diluted share in the previous quarter and an improvement from an operating EBITDA loss of $2.2 million or ($0.95) per basic and diluted share in the second 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).

Q2 2009 Operational Highlights

  • Formed strategic alliance with Akamai Technologies (NASDAQ: AKAM) to mutually package and resell each companies' products and solutions across multiple mediums, including online, mobile networks and IPTV-enabled set-top boxes;

  • Expanded client reach throughout the company's three major operating regions, adding 11 new enterprise-level client contracts across a variety of industry verticals, including PMT and MSN Europe (EMEA), Tabcorp and Sanitarium (Asia-Pacific) and The New York Post (Americas);

  • Acquired certain assets of broadband TV provider Narrowstep, adding several additional key clients and team members, and enhancing the company's Microsoft Silverlight capabilities;

  • Continued the centralization of global software development capabilities and operational management into the company's European headquarters in Prague, Czech Republic -- thereby lowering client delivery costs and enhancing operating margins.

Subsequent Events

  • Effective August 13, 2009, KIT digital's common shares moved from trading on the OTC Bulletin Board to the NASDAQ Global Market stock exchange, and the company's ticker changed from KDGL to KITD;

  • On August 18, 2009, the company completed a public offering of common stock at $7 per share that resulted in net cash proceeds of approximately $18.2 million after financing costs and the conversion of $3.7 million in interim promissory notes into common shares. The funds will be used primarily to finance acquisitions of competitive businesses and, to a lesser extent, the repayment of debt and general corporate purposes. Upon completion of the offering (but before the exercise of up to 0.6 million shares in underwriters' over-allotment purchase options), the company had approximately 8.3 million common shares outstanding.

Management Commentary

"KIT digital is at an exciting point in its development," said Kaleil Isaza Tuzman, the company's chairman and chief executive officer. "Since January 2008 -- which marked a change in management and go-to-market strategy -- we have posted six consecutive quarters of strong organic client growth and operating margin expansion. Our KIT VX Video Management Platform is now the clear leader in its category. Over the next several quarters, we expect to continue to expand market share and geographical reach, while building on our positive cash flow both organically and through acquisition."

Gavin Campion, president of KIT digital, added, "Our performance during the quarter reflects our ongoing commitment to growth coupled with margin expansion and disciplined management decisions. In addition to accelerating financial performance, the second quarter was dedicated to ongoing improvement of our KIT VX platform, including the integration of functionality introduced through our October 2008 acquisition of Visual Connection. The formation of technology and marketing partnerships, like that with Akamai announced at the end of June, demonstrate the unique value of our unified KIT VX platform and should augment our direct sales efforts."

Conference Call

Management will hold a conference call to discuss results for the second quarter ended June 30, 2009 today at 10 a.m. Eastern time.

Date: Wednesday, August 19, 2009
Time: 10 a.m. Eastern time (7 a.m. Pacific)
Dial-in # (North America): +1-800-894-5910
Dial-in # (outside of North America): +1-785-424-1052
Conference ID: 7KITDIGITAL

The conference call will be broadcast simultaneously and available for replay via the Investor Relations section of the company's website at www.kitd.com.

Please call the conference telephone number at least 5-10 minutes before the scheduled start to allow for processing time. If there is any difficulty connecting with the conference call, please contact the Liolios Group at +1-949-574-3860.

A replay of the call will be available after 2 p.m. Eastern time on the same day and until September 19, 2009:

Toll-free replay # (North America): +1-800-723-2156
International replay # (outside of North America): +1-402-220-2660
(No passcode required)

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 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" table below for further information about 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.

GAAP to non-GAAP                 Three months ended     Six months ended
 Reconciliation                       June 30,              June 30,
(amounts in thousands)          --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Consolidated Statement of
 Operations Reconciliation

Net loss on a GAAP basis        $    (490) $  (3,310) $    (322) $ (13,957)
   Non-cash stock-based
    compensation                      272         73        552      4,074
   Merger and acquisition
    and investor relations
    expenses                          351          -        729          -
   Depreciation and
    amortization                      910        354      1,593        599
   Restructuring charges              195        146        314      2,891
   Other non-recurring charges        747        510        991        645
   Impairment of property
    and equipment                       -          -          -        228
   Interest income                     (3)       (29)        (4)       (90)
   Interest expense                   178         40        317         54
   Amortization of deferred
    financing costs and debt
    discount                          449          -        613          -
   Derivative income               (1,626)         -     (3,576)         -
   Other income                      (311)      (111)      (340)      (132)
   Income tax (benefit)
    expense                            (1)         -          2          1
   Non-controlling interest             -         89          -         (7)
                                ---------  ---------  ---------  ---------
Operating EBITDA (loss)         $     671  $  (2,238) $     869  $  (5,694)
                                =========  =========  =========  =========

Consolidated Statement of
 Operations Reconciliation
 per Share

Net loss per share on a GAAP
 basis                          $   (0.11) $   (1.40) $   (0.07) $   (8.03)

   Non-cash stock-based
    compensation                     0.06       0.03       0.12       2.35
   Merger and acquisition
    and investor relations
    expenses                         0.08          -       0.16          -
   Depreciation and
    amortization                     0.21       0.15       0.35       0.34
   Restructuring charges             0.05       0.06       0.07       1.66
   Other non-recurring charges       0.17       0.22       0.22       0.37
   Impairment of property
    and equipment                       -          -          -       0.13
   Interest income                      -      (0.01)         -      (0.05)
   Interest expense                  0.04       0.02       0.07       0.03
   Amortization of deferred
    financing costs and debt
    discount                         0.10          -       0.14          -
   Derivative income                (0.37)         -      (0.79)         -
   Other income                     (0.07)     (0.06)     (0.08)     (0.07)
   Income tax (benefit)
    expense                             -          -          -          -
   Non-controlling interest             -       0.04          -          -
                                ---------  ---------  ---------  ---------
Operating EBITDA (loss)
 per share                      $    0.16  $   (0.95) $    0.19  $   (3.27)
                                =========  =========  =========  =========

Weighted average common
 shares outstanding             4,322,798  2,365,743  4,535,629  1,739,101
                                =========  =========  =========  =========

About KIT digital

KIT digital (NASDAQ: KITD) is a leading, global provider of on-demand Internet Protocol (IP)-based video asset management solutions. Through its end-to-end software platform, "KIT VX," KIT digital enables enterprise clients to acquire, manage and distribute their video assets across the three screens of the computer Internet browser, mobile device and television via an IPTV set-top box. KIT digital clients' use of the VX platform ranges from end-consumer focused video distribution to internal corporate deployments, including corporate communications, human resources, training, security and surveillance. KIT digital is a premier partner to Akamai Technologies, jointly providing an unparalleled suite of IP-based content management, storage and delivery. The KIT digital client base includes over 470 enterprise customers across 30 countries, including The Associated Press, Disney-ABC, Google, IMG Worldwide, Kmart, NASDAQ, News Corp, RCS, Sensis, Telefónica, and Verizon. KIT digital has principal offices in Dubai, Melbourne (Australia), Prague, Toronto, New York and London. For additional information, please visit www.kitd.com.

KIT digital Forward-Looking Statement

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" or similar expressions. 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 as anticipated, believed, estimated or expected. 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 STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
          (Amounts in Thousands, Except Share and Per Share Data)
                                (Unaudited)


                                 Three months ended     Six months ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenue                         $  10,494  $   5,485  $  20,118  $   8,987
                                ---------  ---------  ---------  ---------

  Variable and direct third
   party costs:
    Cost of goods and services      3,634          -      7,112          -
    Hosting, delivery and
     reporting                        414        587        696      1,102
    Content costs                     357        635        818        819
    Direct third party creative
     production costs               1,153      1,220      1,958      1,973
                                ---------  ---------  ---------  ---------
    Total variable and direct
     third party costs              5,558      2,442     10,584      3,894
                                ---------  ---------  ---------  ---------

    Gross profit                    4,936      3,043      9,534      5,093

  General and administrative
   expenses:
    Compensation, travel and
     associated costs
     (including non-cash
     stock-based compensation
     of $272, $73, $552 and
     $4,074, respectively)          3,481      4,157      7,174     12,481
    Legal, accounting, audit
     and other professional
     service fees                     160        269        430        614
    Office, marketing and
     other corporate costs            896        928      1,613      1,766
    Merger and acquisition
     and investor relations
     expenses                         351          -        729          -
    Depreciation and
     amortization                     910        354      1,593        599
    Restructuring charges             195        146        314      2,891
    Other non-recurring
     charges                          747        510        991        645
    Impairment of property
     and equipment                      -          -          -        228
                                ---------  ---------  ---------  ---------
    Total general and
     administrative expenses        6,740      6,364     12,844     19,224
                                ---------  ---------  ---------  ---------

    Loss from operations           (1,804)    (3,321)    (3,310)   (14,131)
  Interest income                       3         29          4         90
  Interest expense                   (178)       (40)      (317)       (54)
  Amortization of deferred
   financing costs and debt
   discount                          (449)         -       (613)         -
  Derivative income                 1,626          -      3,576          -
  Other income                        311        111        340        132
                                ---------  ---------  ---------  ---------

    Net loss before income
     taxes                           (491)    (3,221)      (320)   (13,963)
  Income tax (expense) benefit          1          -         (2)        (1)
                                ---------  ---------  ---------  ---------

    Net loss                         (490)    (3,221)      (322)   (13,964)
  Plus: Net (income) loss
   attributable to the
   non-controlling interest             -        (89)         -          7
                                ---------  ---------  ---------  ---------

    Net loss available to
     common shareholders        $    (490) $  (3,310) $    (322) $ (13,957)
                                =========  =========  =========  =========

  Basic and diluted net loss
   per common share             $   (0.11) $   (1.40) $   (0.07) $   (8.03)
                                =========  =========  =========  =========
  Weighted average common
   shares outstanding           4,322,798  2,365,743  4,535,629  1,739,101
                                =========  =========  =========  =========

  Comprehensive income (loss):
    Net loss                    $    (490) $  (3,310) $    (322) $ (13,957)
    Foreign currency
     translation                      414        (85)       377        (21)
                                ---------  ---------  ---------  ---------
    Comprehensive income
     (loss)                     $     (76) $  (3,395) $      55  $ (13,978)
                                =========  =========  =========  =========




                    KIT DIGITAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                (Amounts in Thousands, Except Share Data)


                                                              December 31,
                                              June 30, 2009     2008 (A)
                                              -------------   ------------
                                               (Unaudited)
Assets:
Current assets:
    Cash and cash equivalents                  $      2,736   $      5,878
    Investments                                         200              -
    Accounts receivable, net                         14,222          8,331
    Inventory, net                                    1,523          2,130
    Other current assets                              2,152          1,539
                                               ------------   ------------
  Total current assets                               20,833         17,878
                                               ------------   ------------

    Property and equipment, net                       4,131          2,928
    Deferred tax assets                                  74             64
    Software, net                                     1,910          2,265
    Customer list, net                                2,854          2,988
    Domain names, net                                    14             19
    Goodwill                                         16,150         15,167
                                               ------------   ------------
  Total assets                                 $     45,966   $     41,309
                                               ============   ============

Liabilities and Stockholders' Equity:
Current liabilities:
    Bank overdraft                             $      1,108   $      1,456
    Capital lease and other obligations                 363            395
    Secured notes payable                             1,326            966
    Senior secured notes payable, net of
     debt discount of $275 and $550                   1,075            950
    Notes payable, net of debt discount
     of $238 and $0                                   2,383              -
    Accounts payable                                  7,831          5,775
    Accrued expenses                                  5,336          2,240
    Income tax payable                                  180            160
    Acquisition liability - Kamera                    1,500          3,000
    Acquisition liability - Visual                    1,075          2,218
    Derivative liability                              2,094              -
    Other current liabilities                         2,052          3,818
                                               ------------   ------------
  Total current liabilities                          26,323         20,978

    Capital lease and other obligations,
     net of current                                     865            949
    Secured notes payable, net of current               206            236
    Acquisition liability - Visual, net
     of current                                         538          1,075
                                               ------------   ------------
  Total liabilities                                  27,932         23,238
                                               ------------   ------------

Equity:
  Stockholders' equity:
    Common stock, $0.0001 par value:
     authorized 30,000,000 shares;
     issued and outstanding 4,811,379
     and 4,183,280, respectively                          -              -
    Additional paid-in capital                       86,148        101,057
    Accumulated deficit                             (68,241)       (82,499)
    Accumulated other comprehensive loss                127           (250)
                                               ------------   ------------
      Total stockholders' equity                     18,034         18,308
                                               ------------   ------------
  Non-controlling interest                                -           (237)
                                               ------------   ------------
    Total equity                                     18,034         18,071
                                               ------------   ------------
  Total liabilities and equity                 $     45,966   $     41,309
                                               ============   ============

(A) - Reference is made to the Company's Annual Report on Form 10-K for
the year ended December 31, 2008, filed with the U.S. Securities and
Exchange Commission on April 15, 2009.

KIT digital Media Contact:
Daniel Goodfellow
Tel. +1-646-873-3086
Email Contact

KIT digital Investor Relations Contact:
Matt Glover
Liolios Group, Inc.
Tel. +1-949-574-3860
Email Contact

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