Forward Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on September 23, 2009.

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are often identified by the use of words such as, but not limited to, "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "will," "plan," "project," "seek," "should," "target," "will," "would," and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included in our Prospectus filed pursuant to Rule 424(b) under the Securities Act with the Securities and Exchange Commission on September 23, 2009. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We provide solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. Our solutions include our proprietary Electronic Reservation Book, or ERB, for restaurant customers and www.opentable.com, a popular restaurant reservation website for diners. The OpenTable network includes approximately 11,000 OpenTable restaurant customers spanning all 50 states as well as select markets outside of the United States. Since our inception in 1998, we have seated approximately 120 million diners through OpenTable reservations; during the three months ended September 30, 2009, we seated an average of approximately three million diners per month. Restaurants pay us a one-time installation fee for onsite installation and training, a monthly subscription fee for the use of our software and hardware and a fee for each restaurant guest seated through online reservations. Our online restaurant reservation service is free to diners. For the three months ended September 30, 2009 and 2008, our net revenues were $17.0 million and $14.2 million, respectively. For the nine months ended September 30, 2009 and 2008, our net revenues were $49.4 million and $41.3 million, respectively. For the three months ended September 30, 2009 and 2008, our subscription revenues accounted for 54% and 55% of our total revenues, respectively, and 53% and 54% of total revenue for the nine months ended September 30, 2009 and 2008, respectively. For the three months ended September 30, 2009 and 2008, our reservation revenues accounted for 41% and 40% of our total revenues, respectively, and 42% of total revenues for the nine months ended September 30, 2009 and 2008.

In 2004, we began to selectively expand outside of North America into countries that are characterized by large numbers of online consumer transactions and reservation-taking restaurants. To date, we have concentrated our international efforts in Germany, Japan and the United Kingdom. Our revenues outside of North America for the three and nine months ended September 30, 2009 and 2008 represented 6% and 5% of our total revenues, respectively. We intend to continue to incur substantial expenses in advance of recognizing material related revenues as we attempt to further penetrate our existing international markets and selectively enter new markets. Some international markets may fail to meet our expectations, and we may decide to realign our focus, as we did when we closed our offices in Spain and France in the fourth quarter of 2008.

Basis of Presentation

General

We report consolidated operations in U.S. dollars and operate in two geographic segments: North America and International. The North America segment is comprised of all of our operations in the United States, Canada and Mexico, and the International segment is comprised of all non-North America operations, which includes operations in Europe and Asia.

Revenues

We generate substantially all of our revenues from our restaurant customers; we do not charge any fees to diners. Our revenues include installation fees for our ERB (including training), monthly subscription fees and a fee for each restaurant guest seated through online reservations. Installation fees are recognized on a straight-line basis over an estimated customer life of approximately six years. Subscription revenues are recognized on a straight-line basis during the contractual period over which the service is delivered to our restaurant customers. Revenues from online reservations are recognized on a transaction basis as the diners are seated by the restaurant. Revenues are shown net of redeemable Dining Points issued to diners. See "Critical Accounting Policies and Estimates-Dining Rewards Loyalty Program" in our Prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on September 23, 2009.

Costs and Expenses

Operations and support. Our operations and support expenses consist primarily of payroll and related costs, including bonuses and stock-based compensation, for those employees associated with installation, support and maintenance for our restaurant customers, as well as costs related to our outsourced call center. Operations and support expenses also include restaurant equipment costs, such as depreciation on restaurant-related hardware, shipping costs related to restaurant equipment, restaurant equipment costs that do not meet the capitalization threshold, referral payments and website connectivity costs. Operations and support expenses also include amortization of capitalized website and development costs (see "Critical Accounting Policies and Estimates-Website and Software Development Costs" in our Prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on September 23, 2009). Also included in operations and support expenses are travel and related expenses incurred by the employees providing installation and support services for our restaurant customers, plus allocated facilities costs.

Sales and marketing. Our sales and marketing expenses consist primarily of salaries, benefits and incentive compensation for sales and marketing employees, including stock-based compensation. Also included are expenses for trade shows, public relations and other promotional and marketing activities, travel and entertainment expenses and allocated facilities costs.

Technology. Our technology expenses consist primarily of salaries and benefits, including bonuses and stock-based compensation, for employees and contractors engaged in the development and ongoing maintenance of our website, infrastructure and software, as well as allocated facilities costs.

General and administrative. Our general and administrative costs consist primarily of salaries and benefits, including stock-based compensation, for general and administrative employees and contractors involved in executive, finance, accounting, risk management, human resources and legal roles. In addition, general and administrative costs include consulting, legal, accounting and other professional fees. Bad debt, third party payment processor, credit card, bank processing fees and allocated facilities costs are also included in general and administrative expenses.

Headcount consists of full-time equivalent employees, as well as full-time equivalent contractors, in all of the sections noted below.

Other Income, Net

Other income, net consists primarily of the interest income earned on our cash accounts. Foreign exchange gains and losses are also included in other income, net.

Income Taxes

We are subject to tax in the United States as well as other tax jurisdictions or countries in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to current U.S. income tax.

As of December 31, 2008, for federal and state tax purposes, we had $10.4 million of federal and $9.8 million of state net operating loss carryforwards available to reduce future taxable income. These net operating loss carryforwards begin to expire in 2023 and 2009 for federal and state tax purposes, respectively. Our ability to use our net operating loss carryforwards to offset any future taxable income will be subject to limitations attributable to equity transactions that resulted in a change of ownership as defined by
Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. We have $15.0 million in unrecognized tax benefits primarily as a result of the limitations on our net operating loss carryforwards. In the event that any unrecognized tax benefits are recognized, the effective tax rate will be affected. Approximately $14.3 million of the unrecognized tax benefit would impact the effective tax rate if recognized. Our policy is to classify interest accrued or penalties related to unrecognized tax benefits as a component of income tax expense. No such interest or penalties have been recorded to date.

Our net deferred tax assets consist primarily of net operating loss carryforwards generated before we achieved profitability. We will assess the need for a valuation allowance on the deferred tax asset by evaluating both positive and negative evidence that may exist. Any adjustment to the deferred tax asset valuation allowance would be recorded in the income statement of the periods that the adjustment is determined to be required.

Critical Accounting Policies and Estimates

In presenting our financial statements in conformity with accounting principles generally accepted in the United States, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures.

Some of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base these estimates and assumptions on historical experience or on various other factors that we believe to be reasonable and appropriate under the circumstances. On an ongoing basis, we reconsider and evaluate our estimates and assumptions. Our future estimates may change if the underlying assumptions change. Actual results may differ significantly from these estimates.

There have been no material changes to our critical accounting policies. For further information on our critical and other significant accounting policies, see our Prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on September 23, 2009.

We believe that the following critical accounting policies involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our consolidated financial statements:

†          Revenue Recognition

†          Dining Rewards Loyalty Program

†          Website and Software Development Costs

†          Income Taxes

†          Stock-based Compensation

Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

                                           Three Months Ended         Nine Months Ended
                                             September 30,              September 30,
                                           2009           2008         2009        2008
                                            (In thousands, except per share amounts)

REVENUES                               $      17,042    $  14,181   $   49,427   $ 41,302

COSTS AND EXPENSES:
Operations and support (1)                     5,077        4,580       15,195     12,925
Sales and marketing (1)                        3,845        3,755       11,652     11,065
Technology (1)                                 2,378        2,467        7,689      7,046
General and administrative (1)                 3,379        3,449       10,321     10,005

Total costs and expenses                      14,679       14,251       44,857     41,041

Income (loss) from operations                  2,363          (70 )      4,570        261
Other income, net                                111          117          256        440

Income before taxes                            2,474           47        4,826        701
Income tax expense                             1,578          337        2,872        850

NET INCOME (LOSS)                      $         896    $    (290 ) $    1,954   $   (149 )

Net income (loss) per share:
Basic                                  $        0.04    $   (0.03 ) $     0.12   $  (0.01 )
Diluted                                $        0.04    $   (0.03 ) $     0.09   $  (0.01 )

Weighted average shares outstanding:
Basic                                         21,640       10,071       15,791      9,962
Diluted                                       23,713       10,071       22,360      9,962

Operations and support                   $     79   $     89   $    232   $    262
Sales and marketing                           180        215        588        681
Technology                                     91        188        382        549
General and administrative                    297        492      1,128      1,623
                                         $    647   $    984   $  2,330   $  3,115

Other Operational Data:
Installed restaurants (at period end):
North America                              10,338      8,788     10,338      8,788
International                               1,337        921      1,337        921
Total                                      11,675      9,709     11,675      9,709

Seated diners (in thousands):
North America                              10,114      8,272     30,106     25,121
International                                 227        120        620        373
Total                                      10,341      8,392     30,726     25,494

Headcount (at period end):
North America                                 247        234        247        234
International                                  63         58         63         58
Total                                         310        292        310        292

Additional Financial Data:
Revenues:
North America                            $ 16,050   $ 13,431   $ 46,775   $ 39,254
International                                 992        750      2,652      2,048
Total                                    $ 17,042   $ 14,181   $ 49,427   $ 41,302

Income (loss) from operations:
North America                            $  3,972   $  2,187   $  9,256   $  6,767
International                              (1,609 )   (2,257 )   (4,686 )   (6,506 )
Total                                    $  2,363   $    (70 ) $  4,570   $    261

Depreciation and amortization:
North America                            $  1,138   $  1,060   $  3,457   $  2,896
International                                 124         92        339        252
Total                                    $  1,262   $  1,152   $  3,796   $  3,148

Stock-based compensation:
North America                            $    559   $    892   $  2,049   $  2,799
International                                  88         92        281        316
Total                                    $    647   $    984   $  2,330   $  3,115

                                 Three Months Ended     Nine Months Ended
                                   September 30,          September 30,
                                  2009        2008       2009        2008
                                       (as a percentage of revenue)

REVENUES                             100 %       100 %      100 %       100 %

COSTS AND EXPENSES:
Operations and support                30          32         31          31
Sales and marketing                   22          27         24          27
Technology                            14          17         15          17
General and administrative            20          24         21          24

Total costs and expenses              86         100         91          99

Income (loss) from operations         14           -          9           1
Other income, net                      -           -          -           1

Income before taxes                   14           -          9           2
Income tax expense                     9           2          5           2

NET INCOME (LOSS)                      5 %        -2 %        4 %         0 %

Revenues



                          Three Months Ended        Nine Months Ended
                             September 30,            September 30,        Three Month   Nine Month
                           2009         2008         2009        2008       % Change      % Change
                                     (Dollars in thousands)

Revenues by Type:
Subscription                  9,141   $   7,854       26,230   $  22,158            16 %         18 %
Reservation                   7,075       5,669       20,908      17,335            25 %         21 %
Installation and
other                           826         658        2,289       1,809            26 %         27 %
Total                   $    17,042   $  14,181   $   49,427   $  41,302            20 %         20 %

Percentage of
Revenues by Type:
Subscription                     54 %        55 %         53 %        54 %
Reservation                      41 %        40 %         42 %        42 %
Installation and
other                             5 %         5 %          5 %         4 %
Total                           100 %       100 %        100 %       100 %

Revenues by Location:
North America           $    16,050   $  13,431   $   46,775   $  39,254            19 %         19 %
International                   992         750        2,652       2,048            32 %         29 %
Total                   $    17,042   $  14,181   $   49,427   $  41,302            20 %         20 %

Percentage of
Revenues by Location:
North America                    94 %        95 %         95 %        95 %
International                     6 %         5 %          5 %         5 %
Total                           100 %       100 %        100 %       100 %

Total revenues increased $2.9 million, or 20%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, and $8.1 million, or 20%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Subscription revenues increased $1.3 million, or 16%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, and $4.1 million, or 18%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Subscription revenues increased as a result of the increase in installed restaurants. Reservation revenues increased $1.4 million, or 25%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, and $3.6 million, or 21%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Reservation revenues increased as a result of the increase in seated diners.

Costs and Expenses



Operations and Support



                                Three Months Ended        Nine Months Ended       Three       Nine
                                  September 30,             September 30,         Month      Month
                                2009          2008         2009        2008      % Change   % Change
                                          (Dollars in thousands)

Operations and support       $    5,077    $    4,580   $   15,195   $  12,925         11 %       18 %

Headcount (at period end):
North America                        74            78           74          78         -5 %       -5 %
International                        25            29           25          29        -14 %      -14 %
Total                                99           107           99         107         -7 %       -7 %

Our operations and support expenses increased $0.5 million, or 11%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, and $2.3 million, or 18%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The increase in operations and support expenses was primarily attributable to an increase of $0.2 million for the three months and $1.0 million for the nine months in headcount related costs due to an increase in costs related to our outsourced customer support center, as well as a $0.3 million increase for the three months and $1.1 million for the nine months in restaurant related costs, including depreciation and equipment write-offs, as a result of the increased installed base of restaurants.

Sales and Marketing



                                Three Months Ended        Nine Months Ended       Three       Nine
                                  September 30,             September 30,         Month      Month
                                2009          2008         2009        2008      % Change   % Change
                                          (Dollars in thousands)

Sales and marketing          $    3,845    $    3,755   $   11,652   $  11,065          2 %        5 %

Headcount (at period end):
North America                        61            51           61          51         20 %       20 %
International                        31            22           31          22         41 %       41 %
Total                                92            73           92          73         26 %       26 %

Our sales and marketing expenses increased $0.1 million, or 2%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, and $0.6 million, or 5%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The increase in sales and marketing expenses for both the three and nine-month periods was primarily attributable to increases in headcount related costs, related to the increase in sales and marketing headcount.

Technology



                                Three Months Ended         Nine Months Ended       Three       Nine
                                  September 30,              September 30,         Month      Month
                                2009          2008         2009         2008      % Change   % Change
                                           (Dollars in thousands)

Technology                   $    2,378    $    2,467   $    7,689    $   7,046         -4 %        9 %

Headcount (at period end):
North America                        68            66           68           66          3 %        3 %
International                         0             0            0            0
Total                                68            66           68           66          3 %        3 %

Our technology expenses decreased $0.1 million, or 4%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, and increased $0.6 million, or 9%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The

change in technology expenses for the nine months ended September 30, 2009 was primarily attributable to a $0.4 million increase in headcount related costs, resulting from an increase in technology headcount. We increased our technology headcount to address website and ERB enhancements, internationalization of our solutions and website, and system control enhancements.

General and Administrative



                                Three Months Ended        Nine Months Ended       Three       Nine
                                  September 30,             September 30,         Month      Month
                                2009          2008         2009        2008      % Change   % Change
                                          (Dollars in thousands)

General and administrative   $    3,379    $    3,449   $   10,321   $  10,005         -2 %        3 %

Headcount (at period end):
North America                        44            39           44          39         13 %       13 %
International                         7             7            7           7          0 %        0 %
Total                                51            46           51          46         11 %       11 %

Our general and administrative expenses remained relatively constant at $3.4 million for the three months ended September 30, 2009 and 2008, and increased $0.3 million, or 3%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The increase in the nine months of 2009 was primarily attributable to a $0.4 million increase in bad debt expense.

. . .