Kit Digital Announces Preliminary Q3 Results, Issues Guidance, Hints Again at M&A

Posted by Joe Zaller
Nov 08 2010

IPTV asset management provider Kit digital announced that it expects to report record revenue of more than $27m for the third quarter of 2010, an increase of 147% versus the same period a year ago, and an 18% improvement sequentially.  The company also said that it added more than 45 net new clients during the quarter, including telco and network operators.

Kit digital says that it expects to book a net loss for the third quarter, but did not disclose how much money it will lose.  However, the company said that its operating EBITDA (a non-GAAP measure) for the third quarter of 2010 is expected to be $4.4m, an increase of 376% versus the same quarter a year ago, and an increase of 5% versus the previous quarter.

The company issued guidance for the full year, saying that it expects to report revenue in excess of $100m for 2010, more than double 2009 revenue, and that it expects full year EBITDA to be approximately $18 million, up 267% over the previous year.  The company also said that expects organic revenue for 2011 to be in excess of $152.5m, with an EBITDA margin for the year of at least 21.5%.

Company chairman & CEO Kaleil Isaza Tuzman issued a bullish statement, saying that the company “could deliver higher operating margins in the short-term if we chose to, [but] our focus is on long-term dominance in our industry segment, and we see a unique window of opportunity to extend our leadership at this time.”

Part of its plan for industry dominance appears to include further M&A activity, and the company announced that it has recently hired botique investment bank Allen & Company LLC as a strategic advisor.  

Last month the Kit digital filed a shelf registration with the SEC under which it may to sell up to $250m in stock.  At that time, Tuzman explained the move, saying “to the extent that it became feasible to acquire one or more of our top competitors at a reasonable valuation, it is important we have the flexibility to do so.”

In today’s statement, Tuzman again hinted again at impending acquisitions, including the potential purchase of a major competitor.  “Consistent with our previously stated strategic mandate, we continue to look at relatively small acquisitions that add geographical and sales vertical reach, which we intend to fund out of our treasury, cash from operations or limited assumption of debt. At the same time, we are considering more ‘transformative’ opportunities, where we might be able to acquire a top competitor and significantly extend our market share.”

Tuzman also talked about shedding some company assets, saying the company is “currently considering the possibility of spinning out a material portion of our professional services and non-SaaS activities that may be more beneficial to work with on an arms’ length basis, and allow us to focus even more on our core SaaS business,” and that such a deal might come as early as the fourth quarter. 

Kit digital will release its complete third quarter results in two weeks.


You can read the full Kit digital preliminary Q3 earnings announcement here.


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