KIT digital Reports Record Second Quarter 2010 Results

Revenue Up 120% to $23.1 Million, Driving Operating EBITDA of $4.2 Million or $0.20 per Share

Prague(16 Oct 2010)

KIT digital, Inc. (NASDAQ: KITD), the leading global provider of video asset management solutions (VAMs) for multi-screen IP-based delivery, reported financial results for the second quarter ended June 30, 2010. All figures are reported in U.S. dollars.

Revenue in the second quarter of 2010 increased 33% to a record $23.1 million from $17.4 million in the previous quarter, and increased 120% from $10.5 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.

For the second quarter of 2010, net loss was $342,000 or $(0.02) per basic and diluted share, compared to a net loss in the previous quarter of $18.4 million or $(1.33) per basic and diluted share, and a net loss in the second quarter of 2009 of $1.6 million or $(0.37) per basic and diluted share.

Net loss for the second quarter 2010 included $3.1 million in non-cash charges, including $1.1 million in stock-based compensation and $2.0 million of depreciation and amortization; a non-cash derivative gain of $2.4 million; $3.3 million in integration expenses related to the reorganization and integration of recently acquired companies; and $886,000 in merger and acquisitions expenses, including investment banking advisory and legal fees.

Operating EBITDA, a non-GAAP metric, which management uses as a proxy for operating cash-flow, increased 42% to a record $4.2 million or $0.20 per basic share in the second quarter of 2010 from $3.0 million or $0.21 per basic share in the previous quarter and increased 526% from $671,000 or $0.16 per basic share in the same year-ago quarter. The company defines operating EBITDA as earnings before derivative income/loss; non-cash stock based compensation; acquisition-related restructuring costs and integration expenses; impairment of property and equipment; direct merger and acquisition expenses; and depreciation and amortization (see important discussion of operating EBITDA in "About the Presentation of Operating EBITDA," below).

Cash and cash equivalents at June 30, 2010 totaled $67.1 million, as compared to $37.8 million at March 31, 2010. The increase was primarily due to the issuance of common stock during the second quarter, offset by payments related to the repurchase of warrants and acquisition of Benchmark Broadcast Systems.

Management employs a natural hedge by matching, as much as possible, currencies of client revenues with currencies of associated client delivery costs and as such does not believe there is material currency-related risk in the business. Management estimates that the impact of foreign exchange rate movements in the second quarter resulted in an approximate 4% decline in U.S. dollar-reported revenues and less than a 1% increase in U.S. dollar-reported operating EBITDA.

Management estimates that approximately 75% of revenue during the second quarter was derived from fees for the company´s "VX" IP video platform solutions, while approximately 25% was attributable to professional services. Revenues from the company's Europe, Middle East & Africa (EMEA) division constituted approximately 41% of the total during the quarter, with approximately 36% being derived from the Americas and 23% from Asia-Pacific.

KIT digital added 23 net new client contracts during the quarter, with an estimated average monthly revenue per client in excess of $25,000.

Q2 2010 Selected Client Wins
A top 10 global pharmaceutical company chose KIT digital to provide a video-based digital communications and digital display strategy for ten of its major brands.

• Worldplay Networks, a developer of proprietary video compression and distribution technology, chose VX Enterprise to roll out a new 3-screen sports network that will distribute high definition sports programming to PC, mobile and set-top box viewers in the Americas, Europe and Greater China.
• Delta Air Lines will be using KIT digital's platform to launch DeltaTube, a new internal communications video portal that will feature executive messaging, internal training and company news.
• The Origin Foundation, a large supplier of green energy in Australasia, selected KIT digital's video platform and digital marketing services.
• National Geographic, one of the world's largest non-profit scientific and educational institutions, selected KIT digital's VX platform to support its new campaigns.
• LIVE TV, the leading cable TV operator in Thailand, awarded KIT digital the contract to convert it to a completely IP-based digital video workflow.
• Seznam, one of Central Europe's largest Internet portals, selected KIT digital to deliver exclusive video content to its online audience.
• The Country Network chose KIT's platform to support the three-screen vision of its network. VX Enterprise will allow The Country Network to open up multiple new revenue streams and reduce operational cost by displacing existing satellite infrastructure.

About KIT digital, Inc.
KIT digital (NASDAQ: KITD) is a leading global provider of video asset management solutions (VAMs) for multi-screen IP-based delivery. KIT VX-one, the company's family of end-to-end software platform solutions, enables enterprise clients to acquire, manage and distribute video assets across the three screens of today's world: the personal computer, mobile device, and IPTV-enabled television set. The application of VX ranges from commercial video distribution to internal corporate deployments, including corporate communications, human resources, training, security and surveillance. KIT digital's client base includes more than 1,000 customers across 40+ countries, including The Associated Press, Best Buy, Bristol-Myers Squibb, Disney-ABC, FedEx, General Motors, Google, Hewlett-Packard, Home Depot, IMG Worldwide, ESPN Star, MediaCorp, News Corp, Telefonica, Verizon and Vodafone. KIT digital is headquartered in Prague, and maintains principal offices in Atlanta, Beijing, Buenos Aires, Cairo, Chennai, Cologne, Delhi, Dubai, Kolkata, London, Melbourne (Australia), Mumbai, New York, Singapore, Stockholm and Toronto. For additional information, visit www.kitd.com or follow the company on Twitter at www.twitter.com/KITdigital.