RLJ Entertainment Reports Second Quarter 2018 Financial Results

SILVER SPRING, Md., Aug. 9, 2018 /PRNewswire/ -- RLJ Entertainment, Inc. ("RLJ Entertainment," "RLJE" or "the Company") (NASDAQ: RLJE), today announced financial results for the quarter ended June 30, 2018.

Second Quarter 2018 Highlights

    --  Digital Channels paying subscribers increased 49.1% from the second
        quarter of 2017 to over 820,000. Digital Channels segment revenues
        increased 46.0% to $9.4 million from $6.4 million in second quarter
        2017.
    --  Net revenues increased 14.0% to $21.5 million, primarily driven by a
        $3.0 million increase in Digital Channels segment revenues.
    --  Gross profit increased 15.3% to $11.2 million and gross margin increased
        approximately 60 basis points to 52.3% in the second quarter 2018 from
        last year. Continued growth in our Digital Channels segment, which
        represents a larger portion of total revenues, drove the improvements in
        gross profit and gross margin.
    --  Equity earnings from Agatha Christie Limited (ACL) increased 48.2%
        year-over-year to $1.3 million driven by ACL's film and publishing
        business segments.
    --  Net loss was $2.0 million compared to $0.9 million in the second quarter
        of 2017 as a result of our higher investment in content and marketing
        expenses, as well as $1.0 million of transaction costs incurred to
        respond to AMC Networks' merger proposal offset by the improvement in
        gross profit generated by our Digital Channels segment.
    --  Adjusted EBITDA increased to $4.5 million from $3.9 million in the
        second quarter of 2017 primarily due to the growth of higher-margin
        Digital Channels segment revenues.

Robert L. Johnson, Chairman of RLJ Entertainment, stated, "The OTT landscape continues to represent a tremendous growth future as viewership increases and new platforms emerge. With our differentiated targeted brands, Acorn TV and Urban Movie Channel (UMC), that fulfill consumers' demands and preferences, we continue to expand our position, delivering a strong value proposition to subscribers."

Miguel Penella, Chief Executive Officer of RLJ Entertainment, stated, "Subscriber growth was strong in second quarter 2018, gaining momentum as our increased investments in unique and original content, broader distribution across multiple recognized platforms and heightened consumer awareness continue to pay off. Digital Channel subscribers grew past the 820,000 mark, our Wholesale business remains a strong, increasingly profitable contributor, and Agatha Christie Limited's performance yields both highly demanded content and strong dividends in our IP segment."

Mark Nunis, Principal Financial and Accounting Officer of RLJ Entertainment, commented, "RLJ Entertainment's revenue gains and profitability expansion continued in the quarter as we execute consistently on increasing our strategic investments in growth and controlling costs carefully."

Conference Call Information
In view of the recently announced transaction with AMC Networks, RLJ Entertainment will not conduct a conference call this quarter.

About RLJ Entertainment, Inc.
RLJ Entertainment, Inc. (NASDAQ: RLJE) is a premium digital channel company serving distinct audiences primarily through its popular OTT branded channels, Acorn TV (British TV) and UMC (Urban Movie Channel), which have rapidly grown through development, acquisition, and distribution of its exclusive rights to a large library of international and British dramas, independent feature films and urban content. RLJE's titles are also distributed in multiple formats including broadcast and pay television, theatrical and non-theatrical, DVD, Blu-ray, and a variety of digital distribution models (including EST, VOD, SVOD and AVOD) in North America, the United Kingdom, and Australia. Additionally, through Acorn Media Enterprises, its UK development arm, RLJE co-produces and develops new programs and owns 64% of Agatha Christie Limited. For more information, please visit RLJEntertainment.com, Acorn.tv, and UMC.tv.

Forward Looking Statements
This press release may include "forward looking statements" within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Other than statements of historical fact, all statements made in this press release are forward-looking, including, but not limited to, statements regarding goals, industry prospects, future results of operations or financial position, and statements of our intent, belief and current expectations about our strategic direction, prospective and future results and condition. In some cases, forward-looking statements may be identified by words such as "will," "should," "could," "may," "might," "expect," "plan," "possible," "potential," "predict," "anticipate," "believe," "estimate," "continue," "future," "intend," "project" or similar words.

Forward-looking statements involve risks and uncertainties that are inherently difficult to predict, which could cause actual outcomes and results to differ materially from our expectations, forecasts and assumptions. Factors that might cause such differences include, but are not limited to:

    --  Our ability to satisfy the conditions in the Agreement and Plan of
        Merger we have entered with AMC Networks, Inc. and to complete the
        merger contemplated by that agreement;
    --  Our financial performance, including our ability to achieve improved
        results from operations and improved earnings before income tax,
        depreciation and amortization, non-cash royalty expense, interest
        expense, non-cash exchange gains and losses on intercompany accounts,
        goodwill impairments, restructuring costs, change in fair value of stock
        warrants and other derivatives, stock-based compensation,
        basis-difference amortization in equity earnings of affiliate and
        dividends received from affiliate in excess of equity earnings of
        affiliate (or Adjusted EBITDA);
    --  Our expectation that subscribers, revenues and financial performance of
        our digital channels will continue to grow and have a positive effect on
        our liquidity, cash flows and operating results;
    --  The effects of limited cash liquidity on operational performance;
    --  Our obligations under the credit agreement;
    --  Our ability to satisfy financial ratios;
    --  Our ability to generate sufficient cash flows from operating activities;
    --  Our ability to fund planned capital expenditures and development
        efforts;
    --  Our inability to gauge and predict the commercial success of our
        programming;
    --  Our ability to maintain relationships with customers, employees and
        suppliers, including our ability to enter into revised payment plans,
        when necessary, with our vendors that are acceptable to all parties;
    --  Delays in the release of new titles or other content;
    --  The effects of disruptions in our supply chain;
    --  The loss of key personnel; or
    --  Our public securities' limited liquidity and trading.

You should carefully consider and evaluate all of the information in this press release, including the risk factors listed above and in our Form 10-K filed with the Securities Exchange Commission (or SEC), including "Item 1A. Risk Factors." If any of these risks occur, our business, results of operations, and financial condition could be harmed, the price of our common stock could decline and you may lose all or part of your investment, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements contained in this press release. Unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any such forward-looking statements that may reflect events or circumstances occurring after the date of this press release.

Readers are referred to the most recent reports filed with the SEC by RLJ Entertainment. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Additional Information About the Transaction and Where to Find It
This communication may be deemed to be solicitation material with respect to the proposed transaction for AMC Networks to acquire RLJ Entertainment. In connection with this proposed transaction, AMC Networks will file relevant materials with the SEC, including amended Schedule 13D filings and a transaction statement on Schedule 13E-3 with respect to RLJ Entertainment. RLJ Entertainment will file relevant materials with the SEC, including a proxy statement on Schedule 14A. STOCKHOLDERS OF RLJ ENTERTAINMENT ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING AMC NETWORKS' TRANSACTION STATEMENT AND RLJ ENTERTAINMENT'S PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain the documents free of charge at the SEC's web site, http://www.sec.gov, and RLJ Entertainment's stockholders will receive information at an appropriate time on how to obtain transaction-related documents free of charge from RLJ Entertainment. Such documents are not currently available.

Participants in Solicitation
AMC Networks and its directors and executive officers, and RLJ Entertainment and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of RLJ Entertainment common stock in respect of the proposed transaction. Information about the directors and executive officers of AMC Networks is set forth in the proxy statement for AMC Network's 2018 Annual Meeting of Stockholders, which was filed with the SEC on April 26, 2018. Information about the directors and executive officers of RLJ Entertainment is set forth in the proxy statement for RLJ Entertainment's 2017 Annual Meeting of Stockholders, which was filed with the SEC on June 23, 2017. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement regarding the proposed transaction when it becomes available.

No Offer or Solicitation
This communication is for informational purposes only and is not intended to and does not constitute an offer to subscribe for, buy or sell, or the solicitation of an offer to subscribe for, buy or sell, or an invitation to subscribe for, buy or sell any securities or a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, invitation, sale or solicitation would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Media Contact:
Traci Otey Blunt, 301-830-6204
RLJ Entertainment, Inc.
tblunt@rljentertainment.com

Investor Contact:
Jody Burfening/Carolyn Capaccio, 212-838-3777
LHA
ir@rljentertainment.com


                                                                                             RLJ ENTERTAINMENT, INC.

                                                                                           Consolidated Balance Sheets

                                                                                                   (Unaudited)

                                                                                    As of June 30, 2018 and December 31, 2017


                                                                                                                              June 30,            December 31,

    (In thousands, except share data)                                                                                              2018                    2017
                                                                                                                                   ----                    ----

    ASSETS

    Cash                                                                                                                                   $3,453                   $6,215

    Accounts receivable, net                                                                                                               16,989                   24,926

    Inventories, net                                                                                                                        4,599                    4,448

    Investments in content, net                                                                                                            78,660                   70,483

    Prepaid expenses and other assets                                                                                                       1,022                    1,197

    Property, equipment and improvements, net                                                                                               1,049                    1,185

    Equity investment in affiliate                                                                                                         20,135                   21,589

    Other intangible assets, net                                                                                                            7,081                    7,752

    Goodwill                                                                                                                               13,911                   13,985
                                                                                                                                           ------                   ------

    Total assets                                                                                                                         $146,899                 $151,780
                                                                                                                                         ========                 ========

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Accounts payable and accrued liabilities                                                                                              $13,755                  $16,707

    Accrued royalties and distribution fees                                                                                                46,584                   47,414

    Deferred revenue                                                                                                                        3,388                    2,859

    Debt, net of discounts and debt issuance costs                                                                                         54,854                   52,639

    Deferred tax liability                                                                                                                    367                      518

    Stock warrant and other derivative liabilities                                                                                         17,123                   13,685
                                                                                                                                           ------                   ------

    Total liabilities                                                                                                                     136,071                  133,822
                                                                                                                                          -------                  -------

    Commitments and contingencies (see Note 14)

    Shareholders' Equity

    Redeemable convertible preferred stock, $0.001 par value, 1,000,000 shares                                                             18,887                   19,563
       authorized; 31,046 shares issued; 15,198 shares outstanding at June 30, 2018
       and December 31, 2017; liquidation preference of $17,993 at June 30, 2018
       and $17,997 at December 31, 2017

    Common stock, $0.001 par value, 250,000,000 shares authorized, 15,138,250                                                                  15                       14
       shares issued and 15,127,138 shares outstanding at June 30, 2018; and
       14,071,423 shares issued and outstanding at December 31, 2017

    Additional paid-in capital                                                                                                            135,844                  132,422

    Accumulated deficit                                                                                                                 (140,055)               (130,842)

    Accumulated other comprehensive loss                                                                                                  (3,863)                 (3,199)

    Treasury shares, at cost, 11,112 shares at June 30, 2018 and zero at                                                                        -                       -
       December 31, 2017


    Total shareholders' equity                                                                                                             10,828                   17,958
                                                                                                                                           ------                   ------

    Total liabilities and shareholders' equity                                                                                           $146,899                 $151,780
                                                                                                                                         ========                 ========


                                                                           RLJ ENTERTAINMENT, INC.

                                                                    Consolidated Statements of Operations

                                                                                 (Unaudited)

                                                                   Six Months Ended June 30, 2018 and 2017


                                                                                         Three Months Ended June 30,             Six Months Ended June 30,
                                                                                       ---------------------------        -------------------------

    (In thousands, except share data)                                                       2018                     2017                      2018               2017
                                                                                            ----                     ----                      ----               ----

    Revenues                                                                                        $21,474                    $18,833                        $40,056      $32,720

    Cost of sales

    Content amortization and royalties                                                                7,562                      6,261                         14,258       12,329

    Manufacturing and fulfillment                                                                     2,678                      2,829                          5,764        5,881
                                                                                                      -----                      -----                          -----        -----

    Total cost of sales                                                                              10,240                      9,090                         20,022       18,210
                                                                                                     ------                      -----                         ------       ------

    Gross profit                                                                                     11,234                      9,743                         20,034       14,510
                                                                                                     ------                      -----                         ------       ------


    Selling expenses                                                                                  4,776                      2,875                          9,041        5,159

    General and administrative expenses                                                               5,093                      4,716                         10,404        9,239

    Depreciation and amortization                                                                       705                        904                          1,590        1,777
                                                                                                        ---                        ---                          -----        -----

    Total operating expenses                                                                         10,574                      8,495                         21,035       16,175
                                                                                                     ------                      -----                         ------       ------

    INCOME (LOSS) FROM OPERATIONS                                                                       660                      1,248                        (1,001)     (1,665)


    Equity earnings of affiliate                                                                      1,288                        869                          2,072        1,420

    Interest expense, net                                                                           (2,362)                   (2,152)                       (4,653)     (4,038)

    Change in fair value of stock warrants and other derivatives                                      (471)                     (491)                       (3,438)     (3,383)

    (Loss) Gain on extinguishment of debt                                                                 -                     (425)                             -         470

    Other (expense) income, net                                                                     (1,414)                       161                        (1,591)         445
                                                                                                     ------                        ---                         ------          ---

    LOSS FROM OPERATIONS                                                                            (2,299)                     (790)                       (8,611)     (6,751)

       BEFORE BENEFIT (PROVISION) FOR INCOME TAXES

    Benefit (Provision) for income taxes                                                                285                       (76)                           145        (237)
                                                                                                        ---                        ---                            ---         ----

    NET LOSS                                                                                        (2,014)                     (866)                       (8,466)     (6,988)

    Accretion on preferred stock                                                                      (193)                     (379)                         (386)       (756)
                                                                                                       ----                       ----                           ----         ----

    NET LOSS ATTRIBUTABLE TO COMMON                                                                $(2,207)                  $(1,245)                      $(8,852)    $(7,744)

       SHAREHOLDERS


    Net loss per common share attributable to common shareholders:

    Basic and diluted net loss per common share attributable                                        $(0.15)                   $(0.20)                       $(0.60)     $(1.36)
       to common shareholders



    Weighted average shares outstanding:

    Basic and diluted                                                                                15,031                      6,196                         14,730        5,691
                                                                                                     ======                      =====                         ======        =====


                                                                                                                                    RLJ ENTERTAINMENT, INC.

                                                                                                                                   UNAUDITED Adjusted EBITDA

                                                                                                                       Three and Six Months Ended June 30, 2018 and 2017


    We define "Adjusted EBITDA" as earnings before income tax, depreciation, amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives,
     stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.  Management believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to
     investors regarding our financial condition and results of operations because it removes material non-cash items that allows investors to analyze the operating performance of the business using the same metric management uses.  The exclusion of non-cash items better reflects our ability to make
     investments in the business and meet obligations.  Presentation of Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance.  Management uses this measure to assess
     operating results and performance of our business, perform analytical comparisons, identify strategies to improve performance and allocate resources to our business segments. While management considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be
     considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with U.S. GAAP. Not all companies calculate Adjusted EBITDA in the same manner and the measure, as presented, may not be comparable to similarly-titled measures
     presented by other companies.


    The following table includes the reconciliation of our consolidated U.S. GAAP net loss to our consolidated Adjusted EBITDA:


                                                                                                                                     Three Months Ended June 30,                              Six Months Ended June 30,
                                                                                                                                     ---------------------------                              -------------------------

    (In thousands)                                                                                                                        2018                                2017                                2018                                 2017
                                                                                                                                          ----                                ----                                ----                                 ----

    Net loss                                                                                                                                     $(2,014)                                         $(866)                                        $(8,466)                                        $(6,988)

    Interest expense                                                                                                                                2,362                                           2,152                                            4,653                                            4,038

    Provision for income tax                                                                                                                        (285)                                             76                                            (145)                                             237

    Depreciation and amortization                                                                                                                     705                                             904                                            1,590                                            1,777

    Basis-difference amortization in equity earnings of                                                                                               121                                             114                                              246                                              225
       affiliate

    Change in fair value of stock warrants and other                                                                                                  471                                             491                                            3,438                                            3,383
       derivatives

    Stock-based compensation                                                                                                                          638                                             358                                            1,327                                              512

    Restructuring                                                                                                                                   1,097                                             423                                            1,321                                            (192)

    Foreign currency exchange gain on intercompany                                                                                                    381                                           (192)                                             388                                            (475)
       accounts

    Dividends received from affiliate in excess of                                                                                                    824                                               -                                             824                                                -
       equity earnings of affiliate

    Non-cash royalty expense                                                                                                                          228                                             476                                              824                                            1,516
                                                                                                                                                      ---                                             ---                                              ---                                            -----

    Adjusted EBITDA                                                                                                                                $4,528                                          $3,936                                           $6,000                                           $4,033
                                                                                                                                                   ======                                          ======                                           ======                                           ======

View original content with multimedia:http://www.prnewswire.com/news-releases/rlj-entertainment-reports-second-quarter-2018-financial-results-300694487.html

SOURCE RLJ Entertainment, Inc.