Greenfield Online Announces Second Quarter 2008 Financial Results

Greenfield Online, Inc. (Nasdaq: SRVY), a leading Internet survey solutions and comparison shopping services provider, today announced financial results for its second quarter ended June 30, 2008.

Albert Angrisani, President and Chief Executive Officer of Greenfield Online, Inc. commented: "Greenfield Online’s overall business performed well in the second quarter despite a challenging economic environment, generating strong growth in revenue and pro forma adjusted EBITDA."

Financial Highlights

* Pro Forma excludes the effect of the expenses incurred during the first and second quarters of 2008 in connection with the pending class action securities litigation, the Audit Committee investigation and subsequent remediation expenses, the net charge taken by the Company in the first quarter of 2008 for the proposed settlement of the class action securities litigation, as well as expenses incurred during the second quarter of 2008 associated with the proposed merger with affiliates of Quadrangle Group LLC. Pro-Forma operating results are reconciled to GAAP operating results in the “Pro Forma Consolidated Statements of Income” below.

**Non-GAAP Adjusted EBITDA is reconciled to GAAP net income in the section entitled “About Non-GAAP Financial Measures” below.

***Non-GAAP Adjusted EBITDA- Excluding Certain Non-Recurring Charges excludes the effect of expenses incurred during the first and second quarters of 2008 in connection with the pending class action securities litigation, the Audit Committee investigation and subsequent remediation expenses, the net charge taken by the Company in the first quarter of 2008 for the proposed settlement of the class action securities litigation, as well as expenses incurred during the second quarter of 2008 associated with the proposed merger with affiliates of Quadrangle Group LLC. Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges is reconciled to GAAP net income in the section entitled “About Non-GAAP Financial Measures” below.

****Non-GAAP Operating Free Cash Flow is reconciled to GAAP operating income in the section entitled “About Non-GAAP Financial Measures” below.

Key Financial Statistics

• Total net revenue was $36.0 million for the second quarter of 2008 as compared with $30.8 million for the same period in the prior year for an increase of $5.2 million or 16.8% of which approximately $1.8 million or 5.9% was due to favorable currency effects.
  • For the Internet survey solutions segments, total third party net revenue was $24.6 million for the second quarter of 2008, as compared with $23.3 million for the same period in the prior year for an increase of 5.4%.
  • For the comparison shopping segment, total third party net revenue was $11.4 million for the second quarter of 2008, as compared with $7.5 million for the same period in the prior year for an increase of 52.4%.

• Total gross profit was $27.2 million or 75.7% of revenues for the second quarter of 2008, as compared with $22.6 million or 73.2% of revenues for the same period in the prior year.
• Operating income was $3.0 million for the second quarter of 2008 or 8.3% of revenue, as compared to operating income of $4.4 million or 14.3% of revenues for the same period in the prior year. Proforma operating income, excluding costs associated with the proposed merger with affiliates of Quadrangle Group LLC of approximately $1.5 million and charges related to the pending class action securities litigation, the Audit Committee investigation and subsequent remediation of approximately $0.8 million, was $5.2 million or 14.5% of revenue for the second quarter of 2008.
• Net income for the second quarter of 2008 was $2.1 million as compared with $3.1 million for the same period in the prior year. Proforma net income, excluding costs associated with the proposed merger with affiliates of Quadrangle Group LLC of approximately $1.5 million and charges related to the pending class action securities litigation, the Audit Committee investigation and subsequent remediation of approximately $0.8 million, was $4.0 million for the second quarter of 2008.
• Net cash flow provided by operating activities was $2.1 million for the second quarter of 2008 as compared to $7.3 million for the same period in the prior year and $6.0 million in the first quarter of 2008. Net cash flow provided by operating activities was negatively impacted by approximately $2.9 million in payments related to the pending class action securities litigation, the Audit Committee investigation and subsequent remediation in the second quarter of 2008. In addition, the second quarter of 2008 included higher tax payments of approximately $1.9 million, primarily in Germany, when compared to the second quarter of 2007.
• For the second quarter of 2008, Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges was $9.6 million or 26.7% of revenue, as compared to Non-GAAP Adjusted EBITDA of $8.4 million or 27.3% of revenue for the same period in the prior year.
• Non-GAAP Operating Free Cash Flow was a negative $0.2 million for the second quarter of 2008, as compared to $4.8 million for the same period in the prior year, and was negatively impacted by approximately $2.9 million in payments related to the pending class action securities litigation, the Audit Committee investigation and subsequent remediation in the second quarter of 2008. In addition, the second quarter of 2008 included higher tax payments of approximately $1.9 million, primarily in Germany, when compared to the second quarter of 2007.
• As of August 8, 2008, third quarter 2008 Internet survey solutions backlog stands at approximately $17.1 million. Backlog is defined as signed contracts for online survey projects that we expect to complete and deliver to clients during the three months ending September 30, 2008 and excludes expected comparison shopping and advertising revenues. This compares to Internet survey solutions backlog for the second quarter 2008 of approximately $20.5 million as of May 8, 2008, and Internet survey solutions backlog of approximately $19.0 million as of August 8, 2007.
• Bid volume for the three months ended June 30, 2008 was approximately $130 million. This compares to bid volume for the three months ended June 30, 2007 of approximately $152 million.
• For the comparison shopping segment, according to data compiled by ComScore MediaMetrix, unique visitors totaled, in the aggregate, 18.6 million, 18.2 million, and 17.1 million for the months of April, May, and June 2008, respectively, for the European countries of Germany, France, Italy, Spain, the UK, Netherlands and Sweden. The comparative data for the same periods in 2007 was 16.1 million, 20.9 million and 20.1 million.
• Total unique visitors for Ciao.com in the U.S. totaled .60 million, .88 million, and .71 million for the months of April, May and June 2008.
• As of June 30, 2008, the European comparison shopping segment had more than 2,200 active merchants and the Ciao US shopping business had more than 225 active merchants. We define an active merchant as a merchant displaying offers on our shopping portals and accepting click-throughs.

Additional disclosure information:

Trailing Twelve Months EBITDA

The merger agreement that we entered into with entities affiliated with Quadrangle Group LLC (collectively, “Quadrangle”) contains a condition to closing that requires the Company to achieve a minimum consolidated trailing twelve months (“TTM”) EBITDA of $40 million, as defined in Annex II of the Merger Agreement. This condition is also described in our preliminary proxy statement filed with the SEC on July 17, 2008. For the second quarter ended June 30, 2008, our Consolidated TTM EBITDA as calculated per Annex II of the Merger Agreement was in excess of $42 million.

Forward Guidance

For the full fiscal year 2008, we are updating our previously issued annual revenue guidance and our effective tax rate as shown below. We are refining our annual revenue guidance after six months of performance based on our view of current market conditions affecting our worldwide ISS business.

About Greenfield Online

Greenfield Online, Inc. is a global interactive media and services company that collects consumer attitudes about products and services, enabling consumers to reach informed purchasing decisions about the products and services they want to buy; and helping companies better understand their customer in order to formulate effective product marketing strategies. Proprietary, innovative technology enables us to collect these opinions quickly and accurately, and to organize them into actionable form. For more information, visit www.greenfield.com. Through our Ciao comparison shopping portals we gather unique and valuable user-generated content in the form of product and merchant reviews. Visitors to our Ciao portals use these reviews to help make purchasing decisions and we derive revenue from this Internet traffic via e-commerce, merchant referrals, click-throughs, and advertising sales. For more information or to become a member, visit http://www.ciao-group.com. Through our Greenfield Online and Ciao Surveys websites and affiliate networks, we collect, organize and sell consumer opinions in the form of survey responses to marketing research companies and companies worldwide. For more information, visit www.greenfield-ciaosurveys.com. To take a survey, go to www.greenfieldonline.com.

About Non-GAAP Financial Measures

We define Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization and stock based compensation and Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges as earnings before interest expense (income), income taxes, depreciation and amortization, stock based compensation, litigation, investigation and remediation expense, the net litigation settlement charge, and proposed merger costs. We define Non-GAAP Operating Free Cash Flow as net cash provided by operating activities less cash paid for capital expenditures. Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges and Non-GAAP Operating Free Cash Flow may not be comparable to similarly titled measures reported by other companies. We are presenting Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges and Non-GAAP Operating Free Cash Flow because they provide an additional way to view our operations, when considered with both our GAAP results and the reconciliation to net income and net cash provided by operating activities, respectively, which we believe provide a more complete understanding of our business than could be obtained absent this disclosure. Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges and Non-GAAP Operating Free Cash Flow are presented solely as a supplemental disclosure because: (i) we believe it is a useful tool for investors to assess the operating performance of the business without the effect of these non-cash and non-recurring expenses; (ii) we believe that investors will find this data useful in assessing our ability to service or incur indebtedness; and (iii) we use adjusted EBITDA internally to evaluate the performance of our personnel and also as a benchmark to evaluate our operating performance or compare our performance to that of our competitors. The use of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges and Non-GAAP Operating Free Cash Flow has limitations and you should not consider Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges and Non-GAAP Operating Free Cash Flow in isolation from or as an alternative to GAAP measures such as operating income, net income, and net cash flow provided by operating activities, or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity. The following tables set forth the reconciliation of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA-Excluding Certain Non-Recurring Charges and Non-GAAP Operating Free Cash Flow , Non-GAAP financial measures, to GAAP net income and GAAP net cash provided by operating activities, respectively, our most directly comparable financial measure presented in accordance with GAAP.

* Pro Forma excludes the effect of the expenses incurred during the first and second quarters of 2008 in connection with the pending class action securities litigation, the Audit Committee investigation and subsequent remediation expenses, the net charge taken by the Company in the first quarter of 2008 for the proposed settlement of the class action securities litigation, as well as expenses incurred during the second quarter of 2008 associated with the proposed merger with affiliates of Quadrangle Group LLC. Pro-Forma operating results are reconciled to GAAP operating results in the “Pro Forma Consolidated Statements of Income” below.

* * We have reclassified $277,000 related to a gain on sale of marketable securities in the prior year period and $2,000 related to a loss on sale of marketable securities in the current year period previously included in interest income.

About Non-GAAP Financial Measures - Segment Data

An operating segment’s performance is primarily evaluated based on segment operating income, which excludes depreciation and amortization expense, stock-based compensation expense and certain corporate costs not associated with the operations of the segment. These corporate costs are separately stated below and include costs that are primarily related to public company expenses. These include certain costs such as personnel costs, filing fees, legal fees, accounting fees, fees associated with Sarbanes-Oxley compliance, directors and officers insurance, board of directors fees, investor relations costs, fees and costs related to the class action securities litigation, including the Audit Committee’s investigation and subsequent remediation, and the net litigation settlement charge. We believe that Non-GAAP Segment Operating Income as defined above is an appropriate measure of evaluating the operational performance of our segments.

The tables below present information about reported segments for the three and six months ended June 30, 2008 and 2007 (in thousands):

* Prior to the separation of the Ciao Internet survey solutions and the Ciao comparison shopping businesses, the Ciao comparison shopping segment did not have any inter-segment revenues. The legal separation was completed, and effective May 1, 2007, the Ciao comparison shopping segment began recording inter-segment revenues from the sale of panelists to the Ciao Internet survey solutions segment, which panelists are sourced from the Ciao comparison shopping portals.

Cautionary Note Regarding Forwarding Looking Statements

Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, predictions and guidance relating to the Company’s future financial performance and customer demand for Internet survey solutions and comparison shopping services, sales bookings, bid volume, and backlog, Adjusted EBITDA and pro forma Adjusted EBITDA as a percentage of revenue, expected charges related to depreciation and amortization and stock-based compensation, and our effective tax rate. In some cases, you can identify forward-looking statements by terminology such as, “may”, “should”, “expects”, “plans”, “anticipates”, “feel”, “believes”, “estimates”, “predicts”, “potential”, “continue”, “consider”, “possibility”, or the negative of these terms or other comparable terminology. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Such risks and uncertainties include, without limitation, risks related to the growing competitiveness of our marketplace and our ability to compete therein, risks related to foreign currency exchange rate fluctuations, our online business model, demand for our products and services, risks related to the outcome of legal proceedings pending against the company, as well as risks related to the proposed merger with affiliates of Quadrangle Group LLC , such as (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement. (2) the outcome of any legal proceedings that may be instituted against us or others following the announcement of the merger agreement, (3) the inability to complete the merger due to the failure to satisfy other conditions required to complete the merger, (4) risks that the proposed transaction disrupts current plans and operations, and (5) the costs, fees and expenses related to the merger which may materially reduce our earnings per share, (6) risk that our stock price would retreat from its current trading range should the merger or other sale not be consummated, (7) risk that if we terminate the Merger Agreement we may be required to pay Quadrangle a termination fee of up to $10.0 million and reimburse up to $3.5 million of Quadrangle’s expenses, and (8), risk that our management’s and our employee’s attention will be diverted from our day-to-day operations and we may experience employee attrition, and our business, including our vendor and customer relationships may be disrupted during the period while the going private transaction remains pending, and risks related to the alternative proposal announced on August 6, 2008, including our ability to enter into an acceptable definitive agreement with the strategic buyer referred to in the announcement, and other risks detailed in the “Risk Factors” section of our most recent Annual Report on Form 10-K and each subsequent Quarterly Report on Form 10-Q that we file with the Securities and Exchange Commission available at www.sec.gov and under the Investor Relations section of our corporate website at www.greenfield.com. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Contacts:

Greenfield Online
Vice President — Investor Relations
Cynthia Brockhoff, 203-846-5772
Cbrockhoff@Greenfield.com