SIOUX FALLS, SD, April 28, 1998 -- LodgeNet Entertainment Corporation (Nasdaq:LNET) today reported its 18^th consecutive increase in comparative quarterly revenue and EBITDA (earnings before interest, taxes depreciation and amortization). Revenue in the first quarter of 1998 increased 22.6% to $36.3 million in comparison to the first quarter of 1997, while EBITDA increased 31.3% to $9.3 million from $7.1 million a year earlier. Excluding ResNet operations, the core lodging business reported $10.0 million in EBITDA, a 36.8% increase over the year-earlier results.
 

"During the first quarter, we continued to successfully execute our plan of solid growth and performance," said Tim C. Flynn, President and Chief Executive Officer for LodgeNet. "We experienced significant growth in our Guest Pay, free-to-guest and international unit bases while substantially reducing per unit operational costs. We added more than 21,700 Guest Pay units to our core lodging base, ending the quarter with 533,600 total Guest Pay units. Our free-to-guest business also continued to thrive with the addition of more than 15,000 units to end the quarter with 356,000 units."

 "During the first quarter we continued to drive operational efficiencies and reduce our cost structures," said Scott C. Petersen, Executive Vice President and Chief Operating Officer for LodgeNet. "Even as we substantially grew our room base, our total operating expenses on a per unit basis dropped by 4% period over period."

 "Our operating improvements are even more dramatic when analyzing our lodging segment alone," continued Petersen. "On a per-unit basis, total operating expenses dropped 10.2% period over period. Guest Pay operations expense decreased from $3.80 per room per month in the first quarter of 1997 to $3.45 this year and we lowered SG&A by over $580,000. As a result, our EBITDA margin for the period, excluding ResNet operations, expanded to 28.5% this quarter as compared to 24.9% last quarter.

EBITDA was $9.3 million in the first quarter of 1998, an increase of 31.3% as compared to $7.1 million in the first quarter of 1997. As a result of increasing revenues from Guest Pay services, and other factors discussed below, EBITDA as a percentage of total revenues increased to 25.6% in the current quarter as compared to 23.9% in the same quarter of 1997. Excluding ResNet financial results, EBITDA was $10.0 million, an increase of 36.8% over the first quarter of 1997, resulting in an EBITDA margin of 28.5% as compared to 24.9% during last year�s first quarter.

Total revenue for the first quarter of 1998 was $36.3 million, an increase of 22.6% compared to first quarter 1997. This increase included a 24.6% or $6.3 million increase in Guest Pay revenues and $1.2 million of revenue associated with ResNet operations. Average monthly revenue per Guest Pay room, including movie and video game/information service revenue was $20.40 in 1998's first quarter compared to $20.68 in the first quarter of 1997.

Total direct costs increased to $16.1 million in 1998's first quarter from $12.8 million in 1997's first quarter. Guest Pay direct costs increased $3.3 million, in the first quarter of 1998 as compared to the year earlier quarter and included $.6 million in direct costs associated with ResNet operations. Since Guest Pay direct costs, i.e. studio license fees, video game license fees and commissions retained by the hotel, are primarily based on related revenue, such direct costs tend to vary more or less directly with revenue. As a percentage of Guest Pay revenue, such costs increased from 38.0% in the first quarter of 1997 to 41.0% in the current quarter. This increased percentage was primarily attributable to the cost-related effect of decreased video game revenue and an increased percentage of Guest Pay rooms receiving free-to-guest services, which have a lower margin.

The Company's overall gross profit increased 20.4%, or $3.4 million, to $20.3 million on a 22.6% increase in revenues in comparison to the year-earlier period. The Company's overall gross profit margin was 55.8% in the current quarter.

Total operating expenses for 1998's first quarter increased to $23.5 million from $19.4 million in 1997's first quarter. Guest Pay operations expense, consisting of costs directly related to the operation of systems at the hotel sites as well as at residential sites operated by ResNet, increased 29.8%, to $6.1 million from $4.7 million in the comparable quarter of the previous year. This increase is primarily attributable to a 26.3% increase in the average number of installed Guest Pay rooms in the current period as compared to the year-earlier quarter and $.7 million of costs associated with ResNet operations. Per average installed Guest Pay room, direct Guest Pay operations expense averaged $3.45 per month in the current quarter as compared to $3.80 per month in the same quarter of 1997.

Selling, general and administrative expenses decreased to $4.8 million, from $5.1 million in the same quarter a year earlier. Excluding ResNet operations, such expenses were $4.2 million. This decrease reflects a reduction in litigation and facilities-related expenses. As a percentage of revenue, selling, general and administrative expenses equaled 13.3% of revenue in the current quarter as compared to 17.0% in the year-earlier quarter. Exclusive of ResNet operations, such expenses equaled 12.0% of revenue in the current quarter.

Depreciation and amortization expenses increased to $12.6 million in the first quarter of 1998 from $9.7 million in the year-earlier quarter. This increase is directly attributable to the increases in installed Guest Pay rooms and ResNet units, associated software, and other capitalized costs such as service vans, equipment and computers that are related to the increased number of units in service since the year-earlier quarter. ResNet-related depreciation expense was $.8 million during the quarter.

Interest expense increased to $5.2 million in the current quarter from $4.1 million in the comparable quarter of 1997. The Company's operating loss was $(3.3) million in the current quarter as compared to $(2.6) million in the same quarter of 1997. Excluding ResNet operations, the Company�s operating loss decreased to $(1.7) million during the first quarter of 1998 from $(2.2) million during the same period in 1997. The Company's net loss increased to $(8.6) million in the first quarter of 1998, from a net loss of $(6.7) million in the same quarter a year earlier.

LodgeNet Entertainment Corporation (http://www.lodgenet.com) is a specialized communications company that serves more than 4,100 lodging properties in the United States and selected international markets. The company�s proprietary and patented b-LAN system technology enables the delivery of video-on-demand, network-based video games, PRIMESTAR® digital basic and premium cable programming, and other interactive multimedia entertainment and information services geared to the needs of travelers. ResNet Communications, a LodgeNet subsidiary, provides similar services in multifamily residential complexes nationwide, including DBS programming provided by ResNet equity investor TCI Satellite Entertainment, Inc. LodgeNet Entertainment Corporation is listed on Nasdaq and trades under the symbol LNET.

Except for the historical statements contained herein, all statements made in this release are "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and are subject to risks, uncertainties, and other factors that could cause actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Such factors include, among others, the impact of competition and changes to the competitive environment for the Company�s products and services, changes in technology, reliance on strategic partners, uncertainty of litigation, changes in government regulation and other factors detailed, from time to time, in the Company�s filings with the Securities and Exchange Commission.

 
 

		December 31,		March 31,
		1997		1998
Assets				(Unaudited)
Current assets:
Cash and cash equivalents		$ 1,021		$ 840
Accounts receivable, net of allowance for doubtful accounts		21,835		22,120
Prepaid expenses and other		3,457		4,148
Total current assets		26,313		27,108
Property and equipment, net of accumulated depreciation		218,948		225,751
Debt issuance costs, net of accumulated amortization		7,641		7,393
Other assets, net		7,392		11,760
		$ 260,294		$ 272,012
Liabilities and Stockholders� Equity
Current liabilities:
Accounts payable		$ 17,930		$ 12,703
Current maturities of long-term debt		705		736
Accrued expenses		7,010		9,537
Total current liabilities		25,645		22,976
Deferred revenue		2,069		2,334
Long-term debt		182,691		205,224
Minority interest in consolidated subsidiary		310		310
Total liabilities		210,715		230,844
Stockholders� equity:
Common stock, $.01 par value, 20,000,000 shares authorized;
11,322,058 shares outstanding at December 31, 1997 and
11,533,631 shares outstanding at March 31, 1998		113		115
Additional paid-in capital		120,792		120,937
Accumulated deficit		(71,326)		(79,884)
Total stockholders� equity		49,579		41,168
		$ 260,294		$ 272,012