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RHYTHMONE PLC ANNOUNCES SALE OF PRIME VISIBILITY AND EXIT OF ALL NON-CORE PRODUCT LINES

London, England and San Francisco, California – 31 March 2017 — RhythmOne plc (LSE AIM: RTHM, “Company”) announces that it has entered into a definitive agreement (the “Agreement”) to sell its Prime Visibility agency services business (“Prime Visibility”) to Wpromote, LLC (the “Buyer”), an independent digital marketing agency headquartered in Los Angeles, CA (the “Disposal”).

The Disposal aligns with the Company’s stated strategy to draw down its Non-Core product lines in a methodical, cost-neutral manner, and focus exclusively on its Core products and revenue streams in FY2018 and beyond.  Importantly, this sale enables the Company to redirect its resources to Core mobile, video and programmatic products – which represent the Company’s principal revenue and profitability drivers.

Prime Visibility
Prime Visibility is a boutique, performance-driven, full-service digital marketing agency. The agency’s primary offerings include Search Engine Optimization (SEO), Search Engine Marketing (SEM) and several associated digital marketing services, sold via Insertion Order (IO) or statement of work (SOW) agreements. For the year ended 31 March 2016, the last full year for which financial information is available, on standalone basis, Prime Visibility generated estimated revenues of c.$22M and c.$1.3M in adjusted* EBITDA, compared with over $30M in revenues and $2M in adjusted* EBITDA the year prior.  Prime Visibility’s revenues and profitability have continued to erode during FY2017, as the industry has consolidated and the market for such services has shifted from boutique providers to those with scale and scope across multiple geographies, verticals and channels.

Disposal Rationale
Given the evolution of the industry and momentum within its Core business, RhythmOne has accelerated the drawdown of its Non-Core product lines that are no longer considered strategic to future growth. The Disposal is part of the Company’s deliberate strategy to definitively exit all remaining Non-Core products before the end of FY 2017 – including certain non-programmatic, desktop network and applications products. On a go-forward basis, this strategy is expected to result in a more concentrated product suite, focused exclusively on Core growth initiatives that are fully aligned with dominant industry trends. Critically, the exit of Non-Core products, which accounted for 17% of total revenues at the half year, is expected to reduce exposure to declining and unpredictable revenue streams.

Transaction Details and Financial Impact
RhythmOne has agreed to sell Prime Visibility for a total consideration of $3.5M, with $1M paid up front in cash.  The remaining $2.5M is being paid via an interest-bearing vendor note to be paid back in equal annual installments over the ensuing three-year period. The proceeds from the Disposal will be used for general corporate purposes. 

The methodical approach the Company has taken to managing the complete drawdown of Non-Core product lines with only a modest associated cost of exit, is expected to result in a break-even to net positive impact on expected future profitability, based on savings in operating expenses, despite the associated reduction in revenues.

Commenting on the Disposal, S. Brian Mukherjee, CEO of RhythmOne said: “While the Prime Visibility client roster and team were historically important assets to RhythmOne, the services nature of the agency business was fundamentally misaligned with our Core focus.  Together with the sale of Prime Visibility, the definitive exit of all remaining Non-Core product lines increases the predictability of Company performance and dramatically improves the strategic fit of our technology-oriented product portfolio.  The Disposal and exclusive focus on Core mobile, video and programmatic business lines allows us to achieve perfect alignment between Company operations and key industry growth trends.”

The information communicated herein constitutes inside information.

*This press release contains references to adjusted EBITDA attributable to equity holders of the parent. This financial measure does not have any standardized meaning prescribed by IFRS and is therefore referred to as non-GAAP measures. The non-GAAP measures used by RhythmOne may not be comparable to similar measures used by other companies. Adjusted EBITDA is defined as profit/(loss) attributable to equity holders of the parent before interest, other expenses, taxes, depreciation and amortisation, share based payment expense, acquisition and exceptional costs and other expense. Management believes that this measure is a useful supplemental metric as it provides an indication of the results generated by the Company’s principal business activities prior to consideration of how the results are impacted by non-recurring costs, how the results are taxed in various jurisdictions, or how the results are affected by the accounting standards associated with the Group’s share based payment expense. 

About RhythmOne
RhythmOne is a technology-enabled digital media company that connects online audiences with brands through premium content across devices. Founded in 2004 in the UK, the Company pioneered Internet video search and works with digital advertisers, publishers and content providers to offer fully integrated, cross-screen solutions that span desktop and mobile video, rich media, display, social and native advertising, and content formats. Through its fully integrated programmatic platform, RhythmMax, the Company represents digital advertising inventory across owned, controlled and extended supply sources. The RhythmMax platform includes unique brand safety technology, RhythmGuard, which combines leading third-party verification and proprietary filtering technologies to ensure inventory quality in brand safe environments.  RhythmOne’s goal is to maximize the return on advertising spend and provide the most efficient and effective marketplace for digital advertising. The Company is headquartered in San Francisco, United States with offices in the US, UK and Canada. For more information, please visit www.rhythmone.com.

Analyst and Investor Contact
Dan Slivjanovski
RhythmOne plc

Financial Media Contacts
Edward Bridges / Roger Newby
FTI Consulting LLP
(UK) 020 3727 1000

Nomad and Broker for RhythmOne
Nick Westlake (Nomad) / Lorna Tilbian / Toby Adcock
Numis Securities Limited
(UK) 020 7260 1000