KIT digital Reaffirms Guidance, Addresses Eurozone Turbulence and Comments on Recent Events

Financial Guidance and Eurozone Commentary
KIT digital reiterated Q4 2011 guidance of at least $67 million in revenue, EBITDA of approximately $17.5 million and adjusted, or cash, earnings per share (EPS) of $0.33. The company expects to generate at least $2.5 million in free cash flow per month starting in December 2011.

The company also reaffirmed its guidance for 2012, including at least $300 million in revenue and at least $1.45 in adjusted, or cash, EPS, with EBITDA margins expected to reach close to 30% by year-end 2012. KIT digital emphasized it retains an overall "positive bias" regarding its 2012 guidance, which it plans to revisit early next year. KIT also confirmed it expects to remain GAAP net income positive going forward.

"The market is strong for IP-delivered video and over-the-top premium content, and we have become the leading enabler of these 'TV Everywhere' services for telcos, cable operators and major media companies globally," commented Gavin Campion, president of KIT digital. "While we are obviously aware of the general anxiety around the Eurozone, we benefit from the video technology industry's long-term transition towards OTT content delivery and cloud-based services. Our financial performance has not been affected, and we do not anticipate it will be affected by European macroeconomic and political turbulence. In fact, we have thrived and grown market share through even more turbulent times in 2008-2009, and believe there will be a flight to quality as customers shift their spend to KIT digital versus smaller, underfunded competitors."

Recent Insider Sale Commentary
On November 21, 2011, a Form 4 was filed related to a 677,000 share disposition of KIT digital common stock by KIT Media Ltd. As filed with the SEC, KIT digital chairman and chief executive officer, Kaleil Isaza Tuzman, was neither a direct nor indirect beneficial seller in the transaction. This transaction was solely for the purpose of a distribution to third party minority holders in KIT Media who are unaffiliated with KIT digital, and the timing of this distribution was pre-determined by KIT Media charter documents and unrelated to market events or share price at the time of the disposition.

"I have retained all of my ownership in KIT Media and in KIT digital stock which I had prior to the Form 4 filing last week," said Mr. Isaza Tuzman. "This transaction has zero impact on my ownership in KIT digital and I have not sold a single share of KIT digital stock."

As discussed in KIT digital's quarterly and annual filings with the SEC since 2008, KIT Media is an investment vehicle in which Mr. Isaza Tuzman is the lead investor, but which has outside minority shareholders as well. KIT Media's primary activity has been to invest in KIT digital, which it has done alongside other public market investors in multiple public financing rounds since 2008. The pre-planned share disposition by KIT Media was predicted by Mr. Isaza Tuzman on the Q3 2011 earnings broadcast on November 9, 2011, and discussed during previous investor conference calls since early 2010.

Mr. Isaza Tuzman has advised the company that KIT Media has complied with its legal obligations to its minority shareholders, and it does not anticipate any additional disposition of KIT digital shares.

An open letter was recently issued to KIT digital shareholders regarding the KIT Media share distribution, which can be viewed here.

Wall Street Journal Article Commentary
Over the weekend, the Wall Street Journal blog and U.S. "Weekend Edition" print publication published an article in the "Heard on the Street" section (viewable here), referencing several points the company seeks to clarify or correct:

• The WSJ article stated it was "difficult to judge the company's underlying organic growth rate." However, the company has disclosed current revenue contribution from every acquisition it has made over time, and has included pro forma reconciliation tables in its 10-K filings. KIT recently reported that its Q2 2011 pro forma revenues (adjusted for acquired revenues included as of April 1, 2011) were $56 million, meaning the company experienced over 40% annualized organic growth in Q3 2011 given reported revenues of $62.3 million in the third quarter. As explained on the company's Q3 earnings broadcast, KIT's guidance of at least $300 million in revenues for 2012 implies more than 25% organic growth over projected 2011 pro forma revenues of approximately $238 million (adjusted for acquired revenues included as of January 1, 2011).
• The WSJ article stated that "over the past four quarters, the time it takes KIT to collect on accounts receivable has increased to 97 days from 79 days." On its Q3 2011 earnings call, KIT stated that DSOs at the end of Q3 were higher due to reconciliation of acquired receivables onto a common billing platform, and that DSOs as of November 9, 2011 were approximately 85 days -- in line with the company's historical average and levels experienced by other enterprise software providers. The company expects DSOs to decline further, reducing to less than 70 days by Q2 2012.
• The WSJ article implied that Mr. Isaza Tuzman was arrested in Dubai "following a dispute with a lawyer there." In fact, Mr. Isaza Tuzman was never arrested or detained at any time, and the WSJ reporter's reference stems from a frivolous complaint filed in Dubai by an Egyptian national, Ashraf Motei, who claimed Mr. Isaza Tuzman "insulted his family honor" when the company tried to collect powers of attorney and other legal documents it rightfully owns from Mr. Motei's law firm, Motei & Associates. KIT digital and Mr. Isaza Tuzman proactively filed suit in New York (viewable here) to recover the documents and have Mr. Motei remove his complaint, and the majority of the documents have subsequently been surrendered.

In response to the Wall Street Journal article, Mr. Isaza Tuzman commented: "Some of the points made -- on our limited history of operating profitably and the need for a business to prove growth credentials over the longer term, for example -- were quite valid. However, the article regurgitated recent gossip, mixed fact and fiction, and ignored our positive accomplishments, all of which was disappointing."

For additional information, please contact Daniel Goodfellow, SVP of corporate communications for KIT digital, at +1-917-513-6081 or daniel.goodfellow@kitd.com.

Source: KIT digital, Inc.