Posts Tagged ‘Barak Bar-Cohen’

Former KIT Digital CEO Blasts Company for “Attempt to Scapegoat Previous Management” and “Recent Record of Deficient Management and Poor Business Execution”

Broadcast technology vendor financials, Broadcast Vendor M&A, SEC Filings | Posted by Joe Zaller
Nov 26 2012

In a letter to the Board of Directors of KIT Digital, former chairman & CEO, Kaleil Isaza Tuzman, strongly criticized the company for “effectively blam[ing] prior management for the Company’s delayed filing of third quarter results and the Company’s intent to restate its financial statements for the 2009-2011 period, among other issues.”

Tuzman, who oversaw an aggressive M&A program at KIT Digital stepped down from the position of CEO as part of a management shake-up, which also involved the resignation of four directors from the company’s board.

Tuzman resigned from the position of chairman in April 2012 after clashing with the board over strategic issues.  In his resignation letter to KIT Digital’s board of directors, Tuzman said: “I have separately discussed my concerns with some of you regarding the manner in which the Company has been viewed by the public market over the years. Based in part on my concerns, I have made a wholly personal decision to step back from a formal role with the Company. As you know, I have not always agreed with other members of the Board of Directors (the “Board”) or, specifically, with all of the decisions or processes followed by the Strategic Transaction Committee of the Board with reference to the current strategic sale process. Although I will no longer be a member of the Board, I intend to stay involved as a shareholder of the Company, and I will also have greater flexibility to independently consider other strategic alternatives for the Company. I also think my departure from a formal role with the Company will give the Company greater flexibility to evolve in its next, post-consolidation stage of development independent of my personality and role as a founder.”

Tuzman was replaced as CEO on an interim basis by Barak Bar-Cohen, but Bar-Cohen’s tenure was short-lived. Bar-Cohen resigned from KIT Digital in August 2012 and was replaced as CEO by  activist investor Peter Heiland of JEC Capital Partners.

In his letter to KIT Digital’s board, Tuzman cites a litany of instances where he says the company’s “current management has shown disregard for the underlying business,” and goes on to provide a list of action items that company management must do immediately in order to “right its ship.”

Tuzman also says he is “prepared to lead a bidding group to buy the Company at a reasonable and substantial cash premium to the current traded price of the Company’s common stock.”

 

The full text of Tuzman’s letter follows:

 

Board of Directors
KIT digital, Inc.
26 West 17th Street, 2nd Floor
New York, NY
10011

Attention: Bill Russell, Chairman

Dear KIT digital Board of Directors,

KIT digital, Inc.’s (“KITD” or the “Company”) November 21, 2012 8-K (the “8-K”) effectively blamed prior management for the Company’s delayed filing of third quarter results and the Company’s intent to restate its financial statements for the 2009-2011 period, among other issues.  The Company’s attempt to attribute its current problems to prior management is spurious.

As one of KITD’s largest shareholders and the Company’s former chairman and CEO, I have kept my opinions on the Company’s trajectory confidential since my departure in April 2012, in deference to the efforts being expended by current management and to avoid unnecessary discord.  However, I can no longer silently abide the Company’s attempt to scapegoat previous management or tolerate the recent record of deficient management and poor business execution.  KITD shareholders deserve to be leveled with on what has occurred at the Company to date, and shown a path forward to success and enhancement of share value, as we have set forth below.

First, some clarifications concerning some implications contained in the Company’s recent 8-K.  During my tenure at the Company, all revenue recognition decisions were made in consultation with and approved by the Company’s independent accounting firm, and approved by your audit committee. We have no reason to believe any of those decisions were improper.  Since my departure, it is possible that your new audit committee members have elected, in consultation with the firm’s outside auditors, to apply different revenue recognition policies. That is not prior management’s responsibility, and a change in revenue recognition policies and application may reflect your recently insinuated decision to further separate the “software” and “services” lines of the Company’s business.  As shareholders, we cannot yet opine on the merit of your decision, since your 8-K lacked details on the matter.

Similarly, the 8K’s vague reference to a lack of disclosure concerning certain undisclosed “related party transactions” is misleading and inappropriate.  During my tenure with KITD, all related party transactions were vetted by KITD’s outside counsel and relevant disclosures in KITD financial statements were reviewed and approved by the Company’s independent accounting firm.  For instance, as you know, my affiliate investment companies, KIT Media and KIT Capital, supported the Company by investing on four different occasions between 2008 and 2011 in public share issuances alongside other public shareholders.  These transactions were “related party transactions” in nature and were disclosed in great detail in press releases and Company financial statements at the time.  The transactions were very positive for the Company (and included two successfully completed financings during the depth of the 2008-2009 financial crisis) and were broadly lauded by KITD’s shareholder base at the time as demonstrating management’s “skin in the game.”  In addition, stock options and restricted stock grants over time to me or KIT Capital for services rendered were also described in detail in the Company’s public filings.  Accordingly, these transactions were all appropriately disclosed and benefited the Company and its shareholders—and, in fact, neither myself nor KIT Capital has ever exercised or sold any of these stock grants or options, nor have I received a single dollar or share in severance.

By comparison, you granted former CEO Barak Bar-Cohen a $250,000 “success bonus” for an extremely dilutive, death-spiral financing concluded after my departure and JEC Capital (the New York hedge fund which currently controls the Company and for which current KITD CEO Peter Heiland serves as Managing Director) recently lent $2.5 million to the Company without a concomitant press release—and the mention of this related party transaction received only cursory mention in an indirectly related SEC filing.

Given the 8-K’s emphasis on the dire current liquidity situation of the Company, it appears to us that you, in conjunction with the Company’s senior creditors, may be conspiring to artificially decrease the Company’s stock price so as to acquire the Company at a fire sale price that is unfair to shareholders.  Indeed, the 8-K’s disclosure regarding covenant breaches of current lender agreements could be interpreted as a lead-in to a pre-arranged, sweetheart deal with the Company’s  lenders.

Previous management presided over a period between December 2007 and March 2012 during which monthly revenues expanded over 20x, operating results went from huge losses to small gains, and the Company’s shares appreciated from $2.90 to over $9.00. Despite your attempt to blame past management for your current results, those close to the Company report that current management has shown disregard for the underlying business—including key clients, employees and vendors. Most startlingly, you seem to have presided over the Company burning more cash from operations in the seven months since I left than the Company had burned from operations in the prior two fiscal years.

Adding to KITD’s problems, the Company’s current management has:

  • failed to visit many, if not most key clients
  • failed to visit more than a handful of Company field locations
  • lost many, if not most, of the Company’s key salespeople
  • disassembled the Company’s core engineering team
  • demonstrated a lack of sufficient understanding of the Company’s core technology, products and capabilities, and failed to make material progress in product development
  • moved the Company headquarters from its low-cost European center of Prague to a high-cost NYC office—despite over 50% of the Company’s revenues being European in origin
  • incurred ballooning operating losses
  • poorly executed on an ill-conceived idea of stripping down and selling individual pieces of the Company—without sufficient comprehension of how software and services units complement each other in serving clients
  • failed to attract significant new talent to the business
  • failed to add material new client contracts
  • failed to communicate a coherent vision for the future to staff, clients and industry observers
  • left an impression with staff, clients, vendors and competitors alike that KITD is under “temporary”, “hedge fund”, “Wall Street-focused” management.

 

Ignoring these poor managerial decisions, the Company instead seeks to scapegoat prior management in describing its current condition.  It is time to redress this situation.

I originally resigned from my post as CEO of KITD in March 2012 (and subsequently resigned from his role as Chairman in April, 2012) because I had come to irreconcilable differences with the Board at the time concerning strategic decisions and the future of the Company.  As a major shareholder, I ultimately felt I could make a greater positive impact on the Company’s development from the outside than from within, especially considering that the Board formed a Special Strategic Committee (the “Special Committee”) in January 2012 which had effectively taken control of all CEO-level decisions.

By way of background, in December 2011, my core management team had recommended to the Board that the Company complete a major restructuring and consolidation of operations (a plan that you finally began to implement about two months ago).  We also recommended to the Board at such time that the Company pursue two competing strategic transactions, each with the potential to be a homerun for shareholders (one a private equity buy-out and the other a merger-of-equals).  Instead, the Board rejected management’s suggested approach and formed the Special Committee with a broad mandate to oversee “any and all strategic decisions” at the Company.  The Special Committee was comprised of two board members—Wayne R. Walker and Santo Politi—and immediately shut down or irreparably delayed the discussions with the strategic transaction counterparties.  KITD’s management-by-special-committee was predictably dysfunctional.  After months of wrestling with the Special Committee to no avail, myself and several members of the core management team eventually resigned.

In connection with my resignation I issued a letter—which was publicly filed by the Company as an 8-K at the time—stating that I intended to independently consider strategic alternatives for the Company.  After my resignation, a bidding group (led by a large private equity firm which I had introduced to the Company), endeavored to obtain approval from the Special Committee to share information with me so that I could participate in connection with a potential offer for KITD.  Unfortunately, the Special Committee refused this request, to the detriment of all shareholders.

Since that time, KIT Capital and other prospective bidders have been repeatedly delayed or stonewalled in our continued efforts to create shareholder value, while the indecision and delay of new management and board continues to result in value destruction.  For example, although KITD’s current management and board finally adopted the staff reduction and office consolidation plan prior management first put forward almost a year ago, the delay has caused KITD to effectively run out of money and may put the Company into the pockets of its lenders.

KITD must right its ship. From an operational perspective, KITD management must immediately:

  • Articulate a vision of the “new” KIT digital, with the focus being on clients, employees and vendors—and away from capital markets
  • Halve executive management costs
  • Tour the top 30 clients globally to ensure contract compliance and renewal
  • Implement a program to re-invigorate the core team of top 50-performing employees globally
  • Complete our original cost reduction and office consolidation plan—including keeping headquarters in Prague, consolidating engineering team into two locations, consolidating New York and Atlanta office into one location and shutting down six other locations globally (including Dubai), while expanding sales and business development staff by one-third
  • Cease the “divide-and-sell” approach to assets
  • Clearly articulate a balance sheet-fortification strategy, centered on a significant private equity minority investment and concomitant restructuring of existing debt, while conducting an open and transparent auction of the Company (engaging both private equity and strategic buyer prospects), with a publicly announced minimum price of $3.75 per share.

 

We do not believe that current management is capable of the actions listed in this letter.  As a result, we are prepared to lead a bidding group to buy the Company at a reasonable and substantial cash premium to the current traded price of the Company’s common stock.  Since May 2012, we have repeatedly requested that the board engage with us and certain other private equity firms regarding a strategic transaction for the Company.  In light of KITD’s mismanagement and the Company’s current circumstances, the Board can no longer afford to ignore these overtures.

Based on our analysis of publicly available information, and subject to due diligence and the execution of a mutually acceptable definitive agreement, we are prepared to lead a bidding group to buy the Company at $3.75 per share in cash, which represents an 81% premium to the closing price of KITD common stock on Wednesday, November 21, 2012 (and an approximately 750% premium to the reported after-market trading price of KITD common stock on that date).  We have reviewed this transaction with two large private equity groups who are interested in participating with us, and believe we have the backing of the Company’s prior and current executives, salespeople and senior engineers who would be key to execute on our plan to right the KITD ship.   We believe we can finalize financing and business terms with respect to this acquisition very quickly if the Board responds forthwith.

For the benefit of all the shareholders, we ask that you to cease and desist from defamatory and inaccurate descriptions of KITD’s prior management and immediately engage in an open dialogue with us on this offer.

Regards,

Kaleil Isaza Tuzman

On behalf of:
KIT Capital, LLC

 

 

Related Content:

Press Release: Former Chairman and CEO Kaleil Isaza Tuzman Sends Letter to KIT digital Board of Directors

KIT Digital to Restate Historical Financial Statements Due to “Errors and Irregularities”

Reuters: TIMELINE-Management woes roil Kit Digital    http://dcft.co/10BEkdZ

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Streaming Media.Com Article: What’s Going on with KIT Digital?

Management and Board Shake Up at KIT Digital Sends Stock Down 22.3 Percent

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KIT Digital To Cut 300 Jobs in Effort to Right Size Operations

Broadcast technology vendor financials | Posted by Joe Zaller
Sep 18 2012

KIT Digital has implemented a “significant workforce reduction,” which will result in job losses for approximately 300 employees, or 22% of its current headcount, by the time it is completed.

KIT says these actions will save it approximately $40m on an annualized basis, enabling it to “right size its operation and streamline general corporate functions” while maintaining a high standard of customer service.

The majority of the expense reductions will arise from “non-core areas and general and administrative redundancies.”

This announcement is one of the first public moves by KIT Digital activist investor turned interim CEO Peter Heliand, who took control of the company at the beginning of September, leading to the departure of former CEO Barak Bar-Cohen. Heiland, who was also an activist shareholder in Miranda Technology prior to its sale to Belden, owns approximately 8% of the outstanding shares of KIT digital, primarily through JEC Capital Partners, where he is Managing Director.

“By accelerating the integration of the company, we will be able to enhance our product offerings, improve time-to-market efficiency, and bring the business to a place of financial strength,” said Heiland. “While we have completed some non-core divestures and reduced the non essential support infrastructure, we are preserving all of the strategic initiatives surrounding our core competencies as we believe they will drive significant growth.”

The company said the restructuring plan will take place primarily during the third quarter of 2012 and will be completed by the end of calendar year 2012. The company currently estimates that it will record a restructuring expense in the third quarter of 2012 of approximately $4m consisting primarily of one-time termination benefits of which the majority will be paid prior to the end of calendar year 2012.

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Related Content:

Press Release: KIT digital Restructuring Aligns Expenses With Operations

Former KIT Digital CEO Bar-Cohen Resigns After Activist Investor Takes Control

KIT Digital SEC Filing: Heiland Takes Over CEO Role from Barak Bar-Cohen

KIT Digital Posts $102.6 Million GAAP Loss in Q2 2012, Sells Sezmi and Content Solutions Businesses at Steep Loss

Activist Investors Claim Board Seats at KIT Digital, Will Refrain From Adverse Actions Against KIT Digital’s Board

Text of Standstill Agreement Between KIT Digital, JEC Capital Partners, and Costa Brava

KIT Digital Exploring Strategic Options for Company Sale, Fails to Reach Agreement with JEC Capital

KIT Digital Chairman Resigns, Cites Differences With Board of Directors Over Strategic Sales Process

Streaming Media.Com Article: What’s Going on with KIT Digital?

Management and Board Shake Up at KIT Digital Sends Stock Down 22.3 Percent

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Former KIT Digital CEO Bar-Cohen Resigns After Activist Investor Takes Control

SEC Filings | Posted by Joe Zaller
Sep 07 2012

KIT Digital said in an SEC filing that former interim CEO Barak Bar-Cohen left the company on August 29, 2012.

KIT said that after it appointed activist investor, Peter Heiland of JEC Capital Partners, as interim CEO, the company discussed with Bar-Cohen possible continuing roles in the company but were unable to come to a mutually acceptable agreement.

Following the failure to come to an agreement, Bar-Cohen sent a letter notifying the company of the termination of his employment with the Company, as of August 29, 2012.

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Related Content:

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Activist Investors Claim Board Seats at KIT Digital, Will Refrain From Adverse Actions Against KIT Digital’s Board

Text of Standstill Agreement Between KIT Digital, JEC Capital Partners, and Costa Brava

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Streaming Media.Com Article: What’s Going on with KIT Digital?

Management and Board Shake Up at KIT Digital Sends Stock Down 22.3 Percent

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© Devoncroft Partners. All Rights Reserved.

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Activist Investor Heiland Become CEO at KIT Digital

SEC Filings | Posted by Joe Zaller
Aug 30 2012

 

KIT Digital said in a filing with the SEC that activist investor Peter Heiland has been appointed CEO of the company. 

Heiland, the managing director of JEC Capital Partners, replaces interim CEO Barak Bar-Cohen, who became CEO of KIT Digital in April 2012 following the departure of Kaleil Isaza Tuzman, who in his resignation letter cited difference with the company’s board of directors over strategic issues.

This is the second time in recent months that Heiland’s JEC Capital Partners has become involved with a broadcast technology company.  Earlier this year, JEC created activist shareholder drama at Miranda Technologies, which was ultimately sold to Belden – resulting in a tidy profit for JEC.

JEC Capital Partners, which owns 8 percent of KIT Digital, recently signed a “standstill agreement” with KIT.   Under the terms of the standstill agreement, Heiland and another activist investor were given KIT Digital board seats in exchange for supporting KIT digital’s Board, and refraining from taking “certain adverse actions” against KIT digital’s Board.

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KIT Digital SEC Filing: Heiland Takes Over CEO Role from Barak Bar-Cohen

KIT Digital Posts $102.6 Million GAAP Loss in Q2 2012, Sells Sezmi and Content Solutions Businesses at Steep Loss          

Activist Investors Claim Board Seats at KIT Digital, Will Refrain From Adverse Actions Against KIT Digital’s Board

Text of Standstill Agreement Between KIT Digital, JEC Capital Partners, and Costa Brava

KIT Digital Exploring Strategic Options for Company Sale, Fails to Reach Agreement with JEC Capital

KIT Digital Chairman Resigns, Cites Differences With Board of Directors Over Strategic Sales Process

Streaming Media.Com Article: What’s Going on with KIT Digital?

Management and Board Shake Up at KIT Digital Sends Stock Down 22.3 Percent

Activist Shareholder Drama Continues at Miranda Technologies

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KIT Digital Posts $102.6 Million GAAP Loss in Q2 2012, Sells Sezmi and Content Solutions Businesses at Steep Loss

Broadcast technology vendor financials | Posted by Joe Zaller
Aug 15 2012

KIT digital, who last week announced that it had signed a standstill agreement with two activist shareholders in exchange for seats on the company’s board of directors, reported that its revenue for the second quarter of 2012 was $51.1m, up 14% versus the same period a year ago, and down 9% versus the previous quarter.  

The company attributed the sequential sales decline to lower revenue from its broadcast systems integration business, which was down approximately $3.6m versus the previous quarter.  Revenue from large scale broadband media deployments was $28.1m in the quarter, up 9% sequentially.

KITs Q2 results exclude revenue from the company’s “content solutions business,” and the assets of Sezmi Corporation, both of which were divested at the end of the quarter (see below).  KIT took a $55.7m impairment charge as a result of these actions, and is now treating these businesses as discontinued operations.

The GAAP net loss from continuing operations for the quarter was $102.6m or $1.99 per share, compared GAAP los of $19.8m or $0.47 per share last year, and a GAAP net loss $21.5m, or  $0.46 per share last quarter. The GAAP net loss includes the $55.7m impairment charge mentioned above, along with restructuring charges, a reversal in M&A expenses, and other expenses.

The company’s non-GAAP operating loss for the quarter was $18.2m, compared to a non-GAAP operating loss of $4.8m in the preceding quarter and positive non-GAAP operating income of $8.7m in the second quarter of 2011. The non-GAAP operating loss includes $6.5m in bad-debt expense and approximately $3.8m from legal and other professional fees.

Free cash flow the quarter was negative $14.7m, comprised of negative $10m for continuing operations, and negative $4.7m from discontinued operations.

The company ended the quarter with an order backlog of approximately $74.6m, and $35.9m in cash, equivalents, and restricted cash.  KIT’s cash balance increased by about $10.6m since the end of the previous  quarter thanks to the sale of 7 million shares of stock, which netted the company $27.2m after expenses.

 

Assets of Sezmi and “Content Solutions Business” Sold for Steep Losses

During the quarter, KIT sold off the assets of Sezmi Corporation, for $2.9m.  KIT acquired Sezmi at the beginning of 2012 for approximately $27m.  At that time, KIT management said that it expected Sezmi contribute revenue of at least $20m, and earnings of approximately $4m in 2012, and be “immediately accretive on a revenue, cash flow, and cash earnings basis.”  Instead, less than 8 months after closing the Sezmi acquisition, KIT has sold off the business at a loss of $28.6m.  

When pressed for an explanation on the company’s conference call with equity analysts, KIT’s new CFO Fabrice Hamaide said that the forecast for Sezmi “did not turn out the way previous management had believed Sezmi customers and the Sezmi platform would be able to actually deliver.”

The company also said that it sold its “content solutions business” for $1m in cash. The loss associated with the transaction was $15.5m million.

 

“Despite reporting lower sequential revenue, the quality of our revenue mix continues to improve quarter over quarter,” said KIT Digital CEO Barak Bar-Cohen. “Revenue from large scale broadband media deployments, including Cosmos software license fees and professional and managed services, increased during the second quarter on both an absolute and percentage basis, and we anticipate that trend will continue.”

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Related Content:

Press Release: KIT Digital Reports Q2 2012 Results, Improved Revenue Mix, and Strategic, Operational Progress

KIT digital Q2 2012 Earnings Conference Call Transcript

Previous Quarter: KIT Digital Posts GAAP Loss of $24.9 Million in Q1 2012, Issues Updated Guidance

Previous Year: Kit Digital Reports Wider Losses as Revenue Doubles in Q2 2011  

Activist Investors Claim Board Seats at KIT Digital, Will Refrain From Adverse Actions Against KIT Digital’s Board

Text of Standstill Agreement Between KIT Digital, JEC Capital Partners, and Costa Brava

KIT Digital Exploring Strategic Options for Company Sale, Fails to Reach Agreement with JEC Capital

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KIT Digital Posts GAAP Loss of $24.9 Million in Q1 2012, Issues Updated Guidance

Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
May 16 2012

KIT Digital announced that its revenue for the first quarter of 2012 was $59m, down 16% from the previous quarter.

The GAAP net loss in the quarter was $24.9m, compared to GAAP net income of $400,000 last quarter and a GAAP net loss of $12.5m last year.

The non-GAP operating loss for the quarter was $8m, compared to non-GAAP operating income of $16.5m in the preceding quarter and a non-GAAP operating loss of $7.1m for the first quarter of 2011.

The results, which were in line with the KIT’s company’s negative pre-announcement earlier this month, are substantially lower than the company’s previously issued guidance of “at least $72m for the first quarter of 2012”, and full year 2012 revenue in the range of $320m to $330m, with a non-GAAP operating margin in the range of 23.5% to 25.5%.  Based on this guidance, the consensus estimates of equity analysts for the quarter had been revenue of $72.4m and earnings of 3 cents per share.

The poor results are the latest in a series of issues that have roiled the company recently. 

Former KIT Digital CEO Kaleil Isaza Tuzman resigned from his position as the company’s non-executive chairman, citing differences with the company’s board of directors regarding KIT’s strategic sales process.

Tuzman, who oversaw an aggressive M&A program at KIT Digital, recently stepped down as down as the company’s CEO as part of a management shake-up, which also involved the resignation of four directors from the company’s board.

In response to the company’s recent problems, KIT Digital says it has undertaken a number of initiatives aimed at corrective action.  These include:

  • Hiring a new Corporate Controller based in New York;
  • Hiring a new Head of Internal Audit based in New York;
  • Retaining one of the Big Four accounting firms to advise on the implementation of best-practice governance and monthly close policies, as well as to provide advice on the ongoing implementation of Netsuite to manage financial controls and processes; and
  • Appointing HSBC as global financial services partner to implement cash management and pooling functions.
  • Planned divestiture of non-core business lines: content solutions, digital marketing, and lower-margin broadcast systems integration; and
  • Transition of company’s current CFO, Robin Smyth, into a Corporate Development role, and the initiation of a search for a new CFO.

 

Completed Capital Raise
The company also announced that it has raised gross proceeds of approximately $29.2m through the sale of common stock. Cannacord Genuity acted as sole placement agent.

 

FY 2012 Updated Outlook
KIT said that it now expects its revenue for the full year 2012 to be approximately $250m with non-GAAP operating income margins “trending toward previous levels” in the second half of the year. The company’s previous guidance was for full year 2012 revenue in the range of $320m to $330m, with a non-GAAP operating margin in the range of 23.5% to 25.5%. 

 

“During my first 45 days as CEO we have conducted a thorough strategic and operational review of our business,” said Barak Bar-Cohen, CEO. Based on this assessment, we have thus far taken definitive steps to support our operating plan and improve financial controls. This includes raising capital to support our updated operational plan and global commercial strategy. Going forward, we intend to sharpen our focus on tier one video management software and services, which we believe will result in significantly higher cash flow levels by the end of 2012.”

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Related Content:

Press Release: KIT digital Reports Q1 2012 Results In Line With Preliminary Q1 2012 Announcement

Pre-Announcement: KIT Digital Says Q1 2012 Revenue Will Be Substantially Lower Than Previous Guidance

KIT Digital 8-K Filing – details new capital raised

WSJ Article: Investors Need First Aid KIT

KIT Digital Chairman Resigns, Cites Differences With Board of Directors Over Strategic Sales Process

Resignation Letter to KIT Digital Board from Kaleil Isaza Tuzman

Streaming Media Article: What’s Going on with KIT Digital?

Management and Board Shake Up at KIT Digital Sends Stock Down 22.3 Percent

Previous Year: KIT digital Revenues Jump 98% in Q1 2011, Says M&A Phase is Over and Company Will Now Focus on Organic Growth Strategy

Previous Quarter: Kit digital Says its Revenue Doubled in 2011, Forms Strategic Transaction Committee

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KIT Digital Says Q1 2012 Revenue Will Be Substantially Lower Than Previous Guidance

Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
May 03 2012

KIT digital said today that it expects to report revenue for the first quarter of 2012 of approximately $59m, and a non-GAAP operating loss in the first quarter of 2012 of approximately $8m.

These results are substantially lower than the company’s previously issued guidance of “at least $72m for the first quarter of 2012”, and full year 2012 revenue in the range of $320m to $330m, with a non-GAAP operating margin in the range of 23.5% to 25.5%.  Based on this guidance, the consensus estimates of equity analysts for the quarter was revenue of $72.4m and earnings of 3 cents per share. 

Investors did not like the news, and sent the stock down almost 30% to its lowest level in more than three years.

The company attributed the poor results to longer than anticipated sales cycles for a number of larger opportunities, increased personnel costs associated with deployments in future quarters, payments of assumed liabilities arising from the acquisition of Sezmi, and higher than expected legal and advisory fees.

“Over the last several weeks, the management team and I have performed a detailed review of our lines of business and their cash flow contributions, and have determined that previous guidance was too high,” said Barak Bar-Cohen, KIT digital’s CEO. “During our quarterly earnings call, we will present a revised operating plan and financial outlook for a growing, cash-generative software business.”

The negative pre-announcement is the latest in a series of issues that have roiled the company recently. 

Former KIT Digital CEO Kaleil Isaza Tuzman resigned from his position as the company’s non-executive chairman, citing differences with the company’s board of directors regarding KIT’s strategic sales process.

Tuzman, who oversaw an aggressive M&A program at KIT Digital, recently stepped down as down as the company’s CEO as part of a management shake-up, which also involved the resignation of four directors from the company’s board.

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Related Content:

Press Release: KIT digital Announces Preliminary Q1 2012 Results   

WSJ Article: Investors Need First Aid KIT

KIT Digital Chairman Resigns, Cites Differences With Board of Directors Over Strategic Sales Process

Resignation Letter to KIT Digital Board from Kaleil Isaza Tuzman

Streaming Media Article: What’s Going on with KIT Digital?

Management and Board Shake Up at KIT Digital Sends Stock Down 22.3 Percent

Previous Year: KIT digital Revenues Jump 98% in Q1 2011, Says M&A Phase is Over and Company Will Now Focus on Organic Growth Strategy

Previous Quarter: Kit digital Says its Revenue Doubled in 2011, Forms Strategic Transaction Committee

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Management and Board Shake Up at KIT Digital Sends Stock Down 22.3 Percent

Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Mar 23 2012

There were some major changes to the management and board of directors at IPTV video delivery specialist KIT Digital, including the replacement of the company’s CEO and four resignations from its board of directors.

The company said that CEO Kaleil Isaza Tuzman will step down from his position on March 31, 2012 and assume the role of chairman.  He will be replaced as CEO on an interim basis by Barak Bar-Cohen, KIT’s current chief administrative officer.

KIT says it will conduct a search for a permanent CEO.

The company also disclosed in a filing with securities regulators that board member Santo Politi, who chaired the KIT Digital’s compensation committee and served as a member of its M&A committee, resigned from the KIT Digital board “because of differences of opinion with other members of the Board over issues related to the Company’s operations, policies and management.”

KIT also announced the resignation from the company’s board of directors by three members of its management team: Gavin Campion (KIT’s President), Robin Smyth (KIT’s CFO), and Chris Williams (KIT’s CTO).  The company said that Campion, Smyth and Williams “submitted their resignations in order to support the company’s efforts to rebalance its board towards non-management members.  All three will remain in their positions as officers of the company.

For his part, Tuzman said that the move had been planned and will enable him to focus on strategic transactions. “The shift to full-time chairman is a step I have been contemplating for some time. The strategic transaction process, which is underway at the direction of the board’s Special Transaction Committee, is at a pace that requires my dedicated focus and energy, separate to the day-to-day running of the company and investor relations responsibilities. By moving forward today with Barak as our interim CEO, we have built in some structural flexibility over the coming months as we assess strategic options.”

Investors were unimpressed with the news.  KIT’s stock traded down as much as 26% during the day trading and closed down 22.3%, prompting a series of articles about KIT’s performance, including this overview from Yahoo Finance, which highlights some previous drama at the company.

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Related Content:

Press Release: KIT digital Implements Management and Board Changes, Aligns Company for Strategic Opportunities and Operational Success

Kit Digital 8-K filing

Yahoo Finance Article: KIT digital Sinks More Than 20% After Management Shakeup

Kit digital Says its Revenue Doubled in 2011, Forms Strategic Transaction Committee

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