Rewards Network Inc. Reports Positive Operating Income and Cash Flow for the First Quarter and Announces $5.0 Million Stock Repurchase Plan

Market Wire, April, 2009

Rewards Network Inc. (NASDAQ: DINE), a leading provider of marketing services and dining rewards programs to the restaurant industry, today reported its financial results for the first quarter of 2009 and announced that its Board of Directors has authorized the repurchase of up to $5.0 million of the Company's common stock.

Rewards Network reported total sales of $54.0 million and net revenues of $16.0 million for the first quarter of 2009, a decrease of 8.6% and 15.1%, respectively, as compared to the first quarter of 2008. Rewards Network ended the first quarter with 9,926 merchants, a 3.5% increase over the same period in the prior year, and the highest number of merchants since December 2005. Operating expenses decreased $1.6 million, or 9.4%, for the first quarter of 2009 as compared to the same period in the prior year, continuing the Company's focus on achieving operating efficiencies. As a result, the Company maintained positive operating income during the first quarter of 2009.

During the first quarter of 2009, the Company generated $7.7 million of cash from operations, primarily because it continued to mitigate risk and preserve liquidity by purchasing fewer dining credits from fewer merchants. As a result, the net dining credits usage period declined to 6.6 months for the first quarter of 2009, as compared to 9.4 months for the same period in the prior year. The net dining credits portfolio was $63.0 million for the first quarter of 2009, as compared to $94.8 million for the same period in the prior year. The Company ended the first quarter with $16.2 million of cash on hand, debt free, and without drawing on its revolving line of credit.

The following table presents financial highlights of the Company's operations for the three months ended March 31, 2009 and 2008 (in millions, except per share amounts and merchant count).

                                                           1Q'09    1Q'08
                                                          -------  --------
Sales                                                     $  54.0  $   59.1
Net revenues                                              $  16.0  $   18.9
Operating expenses                                        $  15.4  $   17.0
Operating income                                          $   0.9  $    2.3
Net (loss) income                                         $  (0.1) $    1.2
Diluted (loss) earnings per share                         $ (0.00) $   0.04

Total merchants                                             9,926     9,586
Dining Credits portfolio, net of reserves                 $  63.0  $   94.8
Net Dining Credits Usage Period (Months)                      6.6       9.4

"As we expected, the first quarter of 2009 presented challenges for our business as we, along with our customers in the restaurant industry, were impacted by the decline in consumer spending in a difficult economy," said Ron Blake, CEO of Rewards Network. "Consumers are dining out less often and spending less money when they do dine out. Based upon our insights into the restaurant industry, we anticipated the decline in consumer spending and prepared for it by tightening our standards for purchasing dining credits, by purchasing fewer dining credits, and by managing our expenses. We generated cash and remained debt free in the first quarter. We believe the steps we took positively impacted our results."

Merchant count was 3.5% higher at the end of the first quarter of 2009 as compared to the end of the first quarter of 2008, largely as a result of an increase in marketing services merchants. "Our merchant count is the highest we have seen since December 2005 and demonstrates our belief that Rewards Network delivers value to merchants who are seeking to fill seats in difficult economic times," said Blake.

First Quarter 2009 Results

Sales for the first quarter of 2009 were 8.6% lower as compared to the first quarter of 2008. Despite an increase in merchant count, sales were impacted by lower consumer spending, the Company's decision to purchase fewer dining credits, and a shift in participating merchants to lower price point restaurants that meet the preferences of members, in the first quarter of 2009 as compared to the first quarter of 2008.

Net revenues for the first quarter of 2009 were 15.1% lower than the first quarter of 2008. Net revenues were negatively impacted by lower sales and a $1.2 million, or 54.0%, increase in the provision for losses, offset by a $1.5 million, or 20.4%, decrease in member benefits expense. The increase in the provision for losses was due to the increased risk presented by the difficult economic environment. Member benefit expense decreased during the first quarter of 2009 because the Company did not offer bonuses that were available in the prior year period.

Operating expenses for the first quarter of 2009 were $1.6 million, or 9.4%, lower than the first quarter of the prior year due to the Company's use of more cost-effective internet marketing and tight operating expense management.