KIT Digital is expensing/investing 16 mil in 1st half of 2012:
"Our additional commitment of resources in Q4 and our incremental investment and rationalization plan of approximately $16 million in the first half of 2012 should reinforce our leadership position. This increased investment will go towards sales and marketing, R&D, and client services capabilities to support future growth, and we expect the rationalization of certain offices and client service centers to lead to savings of up to $10 million in 2013." (From Q4 earnings release)
This leaves KITD FCF negative in the 1st quarter. Even with this they are guiding 25-35 mil of FCF this year. With incresing revenues and margins it seems like a layup to get to 50+ million of FCF in 2013. So at the current market cap of ~ 330 mil this is about 15% FCF yield. This is an "extrodinarily" high FCF yield for a high growth tech co.
Also BCOV is trading at 6X 2013 Revenues. If KITD was trading at 6X 2013 revenues (~400 mill) it would have a market cap of 2.4 bil. On 50 mil shares KITD would be a ~$48 stock. By the way, BCOV will not be FCF positive until the end of 2013. KITD starts and stays FCF positive next quarter.
With this in mind, I hope they don't sell, so, as a shareholder I can participate in all of the upside of this "grossly undervalued" company.
SO, basically, knowing that the trades/tutes/shorts will 'sell the headline' of NOT being FCF Positive for 1q when that report is listed, it seems like this might create some trading opportunities, no?
Yeah, anyone who's read the 10k KNOWS this is coming, but we also pretty much know that headlines are what moves the market... and those headlines aren't written by true 'longs', but by websites/publishers who grab a theme and post a headline.
BCOV is nowhere near FCF positive but trades at 6-7X the valuation of KITD on a revenue multiple basis. Why is the market so sensitive to KITD's current FCF situation but not at all to BCOV's?
Q2 starts on Monday and KITD said on call that they would be FCF positive in Q2. The market has always been for ward looking. At least 6-12 months. Why does it seem to be looking backward in the case of KITD?