Record Revenue of $10.5 Million, Up 91% Year-Over-Year, With Operating EBITDA of $671,000 or $0.16 per Share, Up 239% Sequentially

NEW YORK, NY and DUBAI, UNITED ARAB EMIRATES -- (Marketwire) -- 08/19/09 -- KIT digital, Inc. (NASDAQ: KITD), a leading global provider of on-demand software solutions for managing and monetizing Internet Protocol (IP)-based video assets, reported record financial results for the second quarter ended June 30, 2009. (Financial results are quoted in U.S. dollars, although a material portion of the company's revenue is earned in other currencies.)

Revenue in the second quarter of 2009 totaled a record $10.5 million, an increase of 9% from $9.6 million in the previous quarter and a 91% increase from $5.5 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.

Net loss for the second quarter of 2009 was $490,000 or $(0.11) per basic and diluted share, compared to a net income in the previous quarter of $168,000 or $0.04 per basic and diluted share and a net loss in the second quarter of 2008 of $3.3 million or $(1.40) per basic and diluted share.

In the second quarter of 2009, operating EBITDA, a non-GAAP term, totaled a record $671,000 or $0.16 per basic and diluted share, an increase of 239% from $198,000 or $0.05 per basic and diluted share in the previous quarter and an improvement from an operating EBITDA loss of $2.2 million or ($0.95) per basic and diluted share in the second quarter of 2008. The company defines operating EBITDA as earnings before non-cash derivative income/(loss); non-cash stock based compensation; acquisition-related restructuring costs and other non-recurring charges; impairment of property and equipment; merger and acquisition expenses; and depreciation and amortization (see important discussion of operating EBITDA in "About the Presentation of Operating EBITDA," below).

Q2 2009 Operational Highlights

• Formed strategic alliance with Akamai Technologies (NASDAQ: AKAM) to mutually package and resell each companies' products and solutions across multiple mediums, including online, mobile networks and IPTV-enabled set-top boxes;
  
  
• Expanded client reach throughout the company's three major operating regions, adding 11 new enterprise-level client contracts across a variety of industry verticals, including PMT and MSN Europe (EMEA), Tabcorp and Sanitarium (Asia-Pacific) and The New York Post (Americas);
  
  
• Acquired certain assets of broadband TV provider Narrowstep, adding several additional key clients and team members, and enhancing the company's Microsoft Silverlight capabilities;
  
  
• Continued the centralization of global software development capabilities and operational management into the company's European headquarters in Prague, Czech Republic -- thereby lowering client delivery costs and enhancing operating margins.

Subsequent Events

• Effective August 13, 2009, KIT digital's common shares moved from trading on the OTC Bulletin Board to the NASDAQ Global Market stock exchange, and the company's ticker changed from KDGL to KITD;
  
  
• On August 18, 2009, the company completed a public offering of common stock at $7 per share that resulted in net cash proceeds of approximately $18.2 million after financing costs and the conversion of $3.7 million in interim promissory notes into common shares. The funds will be used primarily to finance acquisitions of competitive businesses and, to a lesser extent, the repayment of debt and general corporate purposes. Upon completion of the offering (but before the exercise of up to 0.6 million shares in underwriters' over-allotment purchase options), the company had approximately 8.3 million common shares outstanding.

Management Commentary

"KIT digital is at an exciting point in its development," said Kaleil Isaza Tuzman, the company's chairman and chief executive officer. "Since January 2008 -- which marked a change in management and go-to-market strategy -- we have posted six consecutive quarters of strong organic client growth and operating margin expansion. Our KIT VX Video Management Platform is now the clear leader in its category. Over the next several quarters, we expect to continue to expand market share and geographical reach, while building on our positive cash flow both organically and through acquisition."

Gavin Campion, president of KIT digital, added, "Our performance during the quarter reflects our ongoing commitment to growth coupled with margin expansion and disciplined management decisions. In addition to accelerating financial performance, the second quarter was dedicated to ongoing improvement of our KIT VX platform, including the integration of functionality introduced through our October 2008 acquisition of Visual Connection. The formation of technology and marketing partnerships, like that with Akamai announced at the end of June, demonstrate the unique value of our unified KIT VX platform and should augment our direct sales efforts."

Conference Call

Management will hold a conference call to discuss results for the second quarter ended June 30, 2009 today at 10 a.m. Eastern time.

Date: Wednesday, August 19, 2009
Time: 10 a.m. Eastern time (7 a.m. Pacific)
Dial-in # (North America): +1-800-894-5910
Dial-in # (outside of North America): +1-785-424-1052
Conference ID: 7KITDIGITAL

The conference call will be broadcast simultaneously and available for replay via the Investor Relations section of the company's website at www.kitd.com.

Please call the conference telephone number at least 5-10 minutes before the scheduled start to allow for processing time. If there is any difficulty connecting with the conference call, please contact the Liolios Group at +1-949-574-3860.

A replay of the call will be available after 2 p.m. Eastern time on the same day and until September 19, 2009:

Toll-free replay # (North America): +1-800-723-2156
International replay # (outside of North America): +1-402-220-2660
(No passcode required)

About the Presentation of Operating EBITDA

Management uses operating EBITDA for forecasting and budgeting, and as a proxy for operating cash flow. Operating EBITDA is not a financial measure calculated in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation, or as an alternative to net income, operating income or other financial measures reported under GAAP. The company defines operating EBITDA as earnings before: non-cash derivative income/(loss), non-cash stock based compensation; acquisition-related restructuring costs and other non-recurring charges; impairment of property and equipment; merger and acquisition expenses; and depreciation and amortization. Other companies (including the company's competitors) may define operating EBITDA differently. The company presents operating EBITDA because it believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in a similar industry. Management also uses this information internally for forecasting, budgeting and performance-based executive compensation. It may not be indicative of the historical operating results of KIT digital nor is it intended to be predictive of potential future results. See "GAAP to non-GAAP Reconciliation" table below for further information about this non-GAAP measure and reconciliation of operating EBITDA to net loss for the periods indicated.