Vertrue Reports Fiscal 2007 Third Quarter Financial Results

Business Wire, May 8, 2007

* Revenues were $194.4 million versus guidance of $188.0 million to $193.0 million.

* Earnings per share were $0.39 and included a charge of $0.33 for expenses incurred related to the proposed merger. Excluding this charge, adjusted EPS would have been $0.72. Guidance for EPS was $0.76 to $0.81.

* Free cash flow was $22.6 million versus guidance of $18.2 million to $19.3 million.

NORWALK, Conn. -- Vertrue Incorporated (Nasdaq: VTRU), a premier internet direct marketing services company, announced today its financial results for the fiscal 2007 third quarter ended March 31, 2007.

Revenues increased 19% to $194.4 million in the third quarter of fiscal 2007 compared to $163.8 million in the prior year quarter due to an 18% increase in Marketing Services revenues, a 25% increase in Management Services revenues and a 28% increase in Personals revenues. Of the 28% increase in Personals revenues, 24% was due to the acquisition of certain assets of Mobile Lifestyles, Inc., which was acquired in the first quarter of fiscal 2007. The organic growth in consolidated revenues from the third quarter of fiscal 2006 to the third quarter of fiscal 2007 was 13%.

EBITDA increased 12% to $19.5 million in the third quarter of fiscal 2007 compared to $17.4 million reported in the prior year quarter. Net income increased 7% to $4.4 million, or $0.39 per diluted share, in the third quarter of fiscal 2007 compared to $4.1 million, or $0.38 per diluted share, in the prior year quarter. Adjusted EBITDA increased 11% to $20.4 million in the third quarter of fiscal 2007 compared to $18.4 million in the prior year quarter. The fiscal 2007 third quarter results include $5.0 million ($4.2 million after tax, or $0.33 per share) in expenses related to the proposed merger. Fiscal 2007 third quarter results also reflect an increased tax rate related to certain period items recorded this quarter.

Free cash flow was positive $22.6 million for the third quarter of fiscal 2007 compared to $14.6 million in the prior year quarter. This increase was primarily due to lower capital expenditures in the current period and the increased Adjusted EBITDA reported for the period.

Compared to the guidance provided in the January 24, 2007 press release, revenue of $194.4 million was $1.4 million above the high end of guidance. Earnings per share of $0.39 was $0.37 below the low end of guidance due to a charge of $0.33 for expenses related to the proposed merger and a $0.04 charge related to certain tax adjustment recorded this period. Adjusted EBITDA of $20.4 million was $2.3 million below the low end of guidance and included a charge of $5.0 million in expenses related to the proposed merger. Free cash flow of $22.6 million was $3.3 million above the high end of guidance due the better than expected operating results for the business before the impact of expenses related to the proposed merger.

Year to Date Results

Revenues increased 14% to $550.3 million in the first nine months of fiscal 2007 compared to $481.5 million in the prior year due to a 10% increase in Marketing Services revenues, a 55% increase in Management Services revenues and a 26% increase in Personals revenues. Of the 26% increase in Personals revenues, 23% was due to the acquisition of certain assets of Mobile Lifestyles, Inc. The remaining increase was due to organic growth. The organic growth in consolidated revenues from the first nine months of fiscal 2006 to the first nine months of fiscal 2007 was 11%.

EBITDA decreased 1% to $63.5 million in the first nine months of fiscal 2007 compared to $64.4 million reported in the prior year. Net income decreased 3% to $19.8 million, or $1.72 per diluted share, in the first nine months of fiscal 2007 compared to $20.4 million, or $1.78 per diluted share, in the same period last year. Adjusted EBITDA decreased 7% to $56.7 million in the first nine months of fiscal 2007 compared to $60.8 million in the prior year. The fiscal 2007 year to date results included $5.3 million ($4.5 million after tax or $0.35 per share) in expenses related to the proposed merger.

Free cash flow increased to positive $25.3 million for the first nine months of fiscal 2007 compared with $22.9 million in the prior year period due to lower capital expenditures partially offset by increased working capital requirements.

Use of Non-GAAP Measures

See the tables on pages 9 through 10 for reconciliations of the non-GAAP financial measures. An explanation of the relevance of these non-GAAP measures is located on page 10.

Business Outlook

In light of the March 22, 2007 announcement of a definitive agreement and plan of merger, Vertrue is withdrawing its previous earnings guidance for fiscal 2007.

Conference Call

Vertrue will not host a conference call to discuss its third quarter results due to the proposed merger.

Proposed Merger

On March 22, 2007, we entered into a definitive agreement and plan of merger (the "Merger Agreement") with Velo Holdings Inc., a Delaware corporation ("Parent"), and Velo Acquisition Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"). Under the terms of the Merger Agreement, Merger Sub will be merged with and into the Company with the Company continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent (the "Merger"). Parent is owned and/or backed by the equity commitment of an investor group consisting of One Equity Partners II, L.P., Oak Investment Partners XII, L.P., Rho Ventures V, L.P. and Rho Ventures V, Affiliates, L.L.C. Under the terms of the Merger Agreement, at the effective time of the Merger, each outstanding share of Vertrue common stock, other than certain specified shares, will be cancelled and converted into the right to receive $48.50 in cash without interest. The transaction, including the assumption of debt, is valued at approximately $800 million. The transaction is expected to be completed in the first quarter of fiscal 2008, which ends on September 30, 2007, and is subject to receipt of stockholder and customary regulatory approvals as well as satisfaction of additional customary closing conditions. Upon completion of the transaction, Vertrue's executive management team will continue to lead the Company. Assuming this transaction closes as planned, our stock will no longer be publicly traded upon the completion of the transaction. More detailed information regarding the Merger is disclosed in the preliminary proxy statement for a special meeting of stockholders to vote on the Merger Agreement, which was filed with the Securities and Exchange Commission on May 1, 2007.