KIT digital KITD) Updates on FY11 Performance, Boosts FY12 Revs, EPS Outlook
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KIT digital, Inc. (Nasdaq: KITD), has provided an update on its 2011 performance, closed the asset purchase of Sezmi Corporation, raised its 2012 guidance, and implemented plans to move its secondary listing from the Prague Stock Exchange to the London Stock Exchange (in addition to its current NASDAQ Global Select listing).
Q4 2011 Results on Track with Strong Positive Free Cash Flow Generation KIT digital closed 2011 with strong operating and financial momentum. Based on preliminary unaudited information, KIT digital management expects to deliver on its previously provided fourth quarter 2011 guidance, including positive free cash flow in December of at least $2.5 million. KIT digital plans to report preliminary Q4 2011 financial results in February.
During Q4 2011, KIT digital signed over 35 net new and extended customer contracts, including AOL, eTV (South Africa), Grupo Clarin (Argentina), Liberty Global, NBC Universal, OSN (UAE), Prisa (Spain), SA TV (Bangladesh), Starhub (Singapore), Telecom Argentina, The Walt Disney Company, and the U.S. Olympic Committee. IBM was also added as a key new technology, marketing and deployment partner. KIT digital's client base totaled more than 2,450 customers at December 31, 2011.
Accretive Acquisition of Sezmi Provides Impactful Technology, Customers & Personnel On December 30, 2011, KIT digital acquired certain assets and liabilities of Sezmi Corporation, a leading global provider of broadband-broadcast hybrid TV solutions based in Belmont, California. KIT digital paid consideration of approximately $27 million in a mixture of stock and cash, plus earn-outs. The transaction is expected to be immediately accretive on a revenue, cash flow, and cash earnings basis. The closure of the acquisition at year-end allowed for certain tax and accounting consolidation advantages without impacting Q4 2011 operating results.
Sezmi employs a cloud-based software-as-a-service model and its target customers are service operators, such as telcos and ISPs, as well as content providers who desire to provide licensed or owned video content to subscribers across mobile and Internet protocol (IP)-connected home entertainment devices. Sezmi has approximately 80 full-time employees and contractors in the U.S., with another 55 in India. Examples of key customers historically include a leading Mexican mobile operator, Iusacell, and a major Southeast Asian MSO, YTL Communications.
Sezmi was an early innovator developing platform software for IP video management. As part of the transaction, KIT digital acquired 18 patents from Sezmi related to over-the-top (OTT) platform provision in the mobile, online and digital terrestrial television (DTT) environments that it believes enhances its leadership position in the IP video platform industry.
After adjustments for net negative working capital prescribed by the asset purchase agreement, KIT digital paid approximately $16 million in upfront cash-based consideration (including the assumption of liabilities, some of which may be paid over time) and approximately $11 million in KIT digital common stock (or approximately 1.2 million shares). The initial consideration is exclusive of future earn-outs.
Provided that superlative revenue and cash flow targets are achieved from existing Sezmi customers and pre-identified target customers, KIT management estimates aggregate earn-out payments will total $20-$25 million over a period of three years, with absolute and relative accretion improving along with the earn-outs. At KIT digital's sole discretion, earn-outs may be paid either in cash or in stock at future valuation levels.
Following the completion of the acquisition, KIT digital expects to have approximately 47.5 million common shares outstanding.
KIT management estimates that contracted and visible pipeline business from Sezmi will generate revenues of at least $20 million in 2012, with a cash earnings contribution of approximately $4 million -- representing approximately $0.08 of incremental pro forma cash earnings per share (EPS) in 2012.
Stifel Nicolaus Weisel was the exclusive financial advisor to Sezmi in the transaction.
Management Increases 2012 Financial Guidance Given the close of the Sezmi transaction, KIT digital management adjusted its 2012 financial guidance. The company now expects revenues of at least $320 million (as compared to $300 million previously) and adjusted, or cash EPS of at least $1.53 (versus $1.45 previously). The increase in adjusted EPS guidance reflects the accretive Sezmi acquisition, and is inclusive of anticipated restructuring and integration costs.
The Street sees revs of $304.85 million and EPS of 79 cents.
KIT digital continues to project an organic growth rate for 2012 of at least 25%, driven by growth in existing client revenues and the addition of new customers. The company has not experienced a slowdown in its business related to Eurozone macroeconomic turbulence and reiterates a "positive bias" towards its current and revised 2012 guidance.
Q4 2011 Results on Track with Strong Positive Free Cash Flow Generation KIT digital closed 2011 with strong operating and financial momentum. Based on preliminary unaudited information, KIT digital management expects to deliver on its previously provided fourth quarter 2011 guidance, including positive free cash flow in December of at least $2.5 million. KIT digital plans to report preliminary Q4 2011 financial results in February.
During Q4 2011, KIT digital signed over 35 net new and extended customer contracts, including AOL, eTV (South Africa), Grupo Clarin (Argentina), Liberty Global, NBC Universal, OSN (UAE), Prisa (Spain), SA TV (Bangladesh), Starhub (Singapore), Telecom Argentina, The Walt Disney Company, and the U.S. Olympic Committee. IBM was also added as a key new technology, marketing and deployment partner. KIT digital's client base totaled more than 2,450 customers at December 31, 2011.
Accretive Acquisition of Sezmi Provides Impactful Technology, Customers & Personnel On December 30, 2011, KIT digital acquired certain assets and liabilities of Sezmi Corporation, a leading global provider of broadband-broadcast hybrid TV solutions based in Belmont, California. KIT digital paid consideration of approximately $27 million in a mixture of stock and cash, plus earn-outs. The transaction is expected to be immediately accretive on a revenue, cash flow, and cash earnings basis. The closure of the acquisition at year-end allowed for certain tax and accounting consolidation advantages without impacting Q4 2011 operating results.
Sezmi employs a cloud-based software-as-a-service model and its target customers are service operators, such as telcos and ISPs, as well as content providers who desire to provide licensed or owned video content to subscribers across mobile and Internet protocol (IP)-connected home entertainment devices. Sezmi has approximately 80 full-time employees and contractors in the U.S., with another 55 in India. Examples of key customers historically include a leading Mexican mobile operator, Iusacell, and a major Southeast Asian MSO, YTL Communications.
Sezmi was an early innovator developing platform software for IP video management. As part of the transaction, KIT digital acquired 18 patents from Sezmi related to over-the-top (OTT) platform provision in the mobile, online and digital terrestrial television (DTT) environments that it believes enhances its leadership position in the IP video platform industry.
After adjustments for net negative working capital prescribed by the asset purchase agreement, KIT digital paid approximately $16 million in upfront cash-based consideration (including the assumption of liabilities, some of which may be paid over time) and approximately $11 million in KIT digital common stock (or approximately 1.2 million shares). The initial consideration is exclusive of future earn-outs.
Provided that superlative revenue and cash flow targets are achieved from existing Sezmi customers and pre-identified target customers, KIT management estimates aggregate earn-out payments will total $20-$25 million over a period of three years, with absolute and relative accretion improving along with the earn-outs. At KIT digital's sole discretion, earn-outs may be paid either in cash or in stock at future valuation levels.
Following the completion of the acquisition, KIT digital expects to have approximately 47.5 million common shares outstanding.
KIT management estimates that contracted and visible pipeline business from Sezmi will generate revenues of at least $20 million in 2012, with a cash earnings contribution of approximately $4 million -- representing approximately $0.08 of incremental pro forma cash earnings per share (EPS) in 2012.
Stifel Nicolaus Weisel was the exclusive financial advisor to Sezmi in the transaction.
Management Increases 2012 Financial Guidance Given the close of the Sezmi transaction, KIT digital management adjusted its 2012 financial guidance. The company now expects revenues of at least $320 million (as compared to $300 million previously) and adjusted, or cash EPS of at least $1.53 (versus $1.45 previously). The increase in adjusted EPS guidance reflects the accretive Sezmi acquisition, and is inclusive of anticipated restructuring and integration costs.
The Street sees revs of $304.85 million and EPS of 79 cents.
KIT digital continues to project an organic growth rate for 2012 of at least 25%, driven by growth in existing client revenues and the addition of new customers. The company has not experienced a slowdown in its business related to Eurozone macroeconomic turbulence and reiterates a "positive bias" towards its current and revised 2012 guidance.
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