RTHM.L Regulatory News (RTHM)

RHYTHMONE PLC

RHYTHMONE PLC ANNOUNCES TRANSACTION WITH RADIUMONE, INC.

Leading Data Driven Marketing Platform Fortifies and Extends RhythmOne's Core Programmatic Platform

H12018 TRADING IN LINE WITH MANAGEMENT EXPECTATIONS

London, England and San Francisco, CA - 27 June 2017 - RhythmOne plc (LSE AIM: RTHM, "Company" or "1R"), a digital advertising technology company that connects audiences with brands through content across devices, today announces that it has acquired certain assets of RadiumOne, Inc. (the "Acquisition"), a leading data-driven marketing platform. The transaction was signed and closed after market hours on 26 June 2017.

The Acquisition accelerates the Company's strategy to build a unified programmatic platform with unique audiences of uniform quality at scale. Through RadiumOne, 1R gains access to a leading data driven marketing platform, unique consumer insights, audience segmentation and targeting technology, and premium demand relationships - which are expected to impact positively both pricing and fill rates on the 1R platform.

About RadiumOne

Based in San Francisco, CA with operations across North America, Europe and Asia Pacific, RadiumOne is an award winning, data driven marketing platform that analyzes consumer signals in real time to determine consumer intent from a broad range of digital touch points, which includes a brand's paid (advertising), earned (influencers), shared (social) and owned (websites and applications) media channels. This framework allows brands to use predictive algorithms to determine where consumers are in the buying cycle, and exclusively target those consumers with the highest propensity to engage with the brand, across connected devices.

The RadiumOne platform enables advertisers to build highly effective, data-driven campaign strategies that are measurable against specific business outcomes. RadiumOne's technology platform also includes leading analytics and reporting tools that advertisers use for campaign optimization and reporting, and that publishers use to maximize monetization and understand their audiences. RadiumOne maintains relationships with leading global Fortune 1000 brands and agencies, including Allstate, Toyota, Expedia, Sony, Microsoft and Clorox.

RadiumOne was the winner of the 2016 Spark award for "Best Digital Media Solution," and winner of four specific awards at the Institute of Practitioners in Advertising's ("IPA") Media Owner Awards in 2016, including "Best Media Owner." Most recently, the company was winner of three specific 2017 Connies Mediatel Awards, including "Grand Prix Winner."

Acquisition Rationale

The Acquisition fortifies and extends the Company's unified programmatic platform. The Company's platform will now incorporate 1R's massive footprint of curated, high quality audiences from publishers across devices and formats on the supply side, integrated with a sophisticated media buying capability that enables advertisers to maximize campaign effectiveness through proprietary intent-based targeting technology on the demand side. Once the Acquisition has been integrated, 1R will be one of a handful of global players with a complete end-to-end technology stack within the digital advertising ecosystem.

The combination of RadiumOne's unique data management technology and 1R's scale of quality supply will enable demand-side platforms, brands and agencies to access performance- and engagement-based audience segments and private marketplaces within 1R's programmatic platform, to drive return on advertising spend. This represents a captive opportunity to improve fill rates through better audience based targeting for the vast majority of 1R's inventory that currently goes un-monetized, while improving yield for quality publisher partners within the Company's ecosystem. The Company also expects the Acquisition to provide meaningful opportunities to extend beyond brand, and into performance advertising campaigns and budgets.

Finally, the Acquisition brings a close-knit and tenured executive team with significant experience within the advertising technology sector, and deep relationships with agencies and brands both in the US and internationally. The broader RadiumOne operational footprint includes approximately 200 staff globally, dramatically enhancing 1R's international footprint and instantaneously scaling the Company's programmatic sales team.

Financial Overview

RadiumOne has grown substantially over the past five years, but has had a history of losses as an operating company. Based on unaudited financials for CY2016, as a standalone business, RadiumOne generated ($17.5M) in loss before taxes and an Adjusted* EBITDA loss of ($5.6M) on $141M of revenues. The book value of RadiumOne's gross assets was $71M.

1R is only acquiring certain assets and associated liabilities of RadiumOne. Given the scale and complexity of the Acquisition, 1R expects to complete the integration of RadiumOne within 12 to 18 months of ownership. Subject to execution of the cost synergies alone, the Company anticipates that the Acquisition will generate $65M to 75M in revenues and $1M to $3M in Adjusted* EBITDA over the next twelve months. Both are forecast to grow, contributing to organic growth and improved operating margins thereafter.

Transaction Details

Pursuant to the terms of the Acquisition Agreement, the Company has acquired certain assets and related liabilities from RadiumOne for a consideration of up to $22M and the assumption of approximately ($3-4M) in net liabilities. The consideration includes an upfront payment of $5.5M in cash, with up to a further $16.5M being deferred and payable in shares at a future date. The deferred consideration could, in certain circumstances, be payable in cash at the Company's discretion.

If the deferred consideration becomes payable in shares, the shares will be issued at $0.53 per share, representing the Company's average closing price for the 10 trading days ending on 23 June 2017; the maximum number of new RhythmOne ordinary shares that the Company will be required to issue is 30,956,849. Any shares issued will be subject to a lock-up of one year from the date of closing, subject to limited exceptions.

RadiumOne is engaged in litigation with a former director, although all liability relating to this litigation is excluded from the agreement signed in relation to the Acquisition (the "Acquisition Agreement"). The timing of the payment of any deferred consideration is dependent on RadiumOne's satisfying any outstanding potential liabilities outside of the Acquisition Agreement.

Commenting on the Acquisition, S. Brian Mukherjee, CEO and Ted Hastings, President of RhythmOne said:

"RadiumOne's data driven marketing platform, proprietary data management technology, unique targeting capabilities and international footprint dovetail perfectly with RhythmOne's strengths on the supply-side of the value chain, resulting in a true, end-to-end, multi-channel, multi-format, programmatic platform to reach engaged audiences at scale. This transaction fortifies and extends the RhythmMax platform and enables us to meet the growing need for differentiated, data driven audience segmentation and targeting that drive specific business outcomes for advertisers. The Acquisition further advances our mission to provide the most efficient and effective marketplace for digital advertising and content distribution, at scale. We are also delighted to welcome the RadiumOne team - a talented, tenured group with extensive demand-side experience and strong relationships with top global agencies and brands."

Concurrent with this Acquisition announcement, the Company also announces that performance to date for H12018 has been in line with management expectations. The Company will update the market on its financial performance and provide a progress report on its integration efforts during its interim results in November 2018.

The information communicated herein constitutes inside information.

Non-IFRS Measures

*RadiumOne defines Adjusted EBITDA as net income (loss) from operations before: (a) depreciation of property and equipment and amortization of intangible assets; (b) share-based compensation; (c) income tax expense (recovery); (d) transaction and restructuring costs; and (e) other charges, net. Management uses Adjusted EBITDA as a measure of RadiumOne's operating performance because it provides information related to RadiumOne's ability to provide operating cash flows for acquisitions, capital expenditures and working capital requirements. As non-IFRS financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-IFRS financial measures having the same or similar names.

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 offers 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.

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