Good afternoon. At this time, I would like to welcome everyone to the Online Resources first quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you. Ms. Halloran, you may begin your conference.

Thank you to everyone who has joined us today on our conference call for the first quarter 2008 results. Shortly, Matt Lawlor, Chairman and CEO; Ray Crosier, President and COO; and Cathy Graham, Executive Vice President and CFO will present Online Resources financial and operating performance. Before we get started, I want to invite you to view our press release in the Press Room and in the Investors section of our Web site at orcc.com. Also posted with the press release, we have provided some slides on our strategic performance that are integral to following today's conference call. The link is labeled First Quarter 2008 Earnings Conference Call Slides. But first, as is our practice, I'd like to preface our remarks today by taking full advantage of the Safe Harbor provisions of the Securities Litigation Reform Act. The following conference call contains statements about future events and expectations of Online Resources that are forward-looking and involve risks and uncertainties detailed in filings made by the company with the Securities and Exchange Commission. I will provide a more detailed review of the Safe Harbor provisions at the end of this call. Now to you, Matt.

Welcome, everyone. This was a quarter in which the company executed particularly well. Today, we'll cover three topics. First, we'll discuss our first quarter financial results. Year-over-year revenue and earnings were both up sharply. Cathy will provide more detail and update our guidance for the second quarter and full year. Second, we'll discuss our first quarter operating fundamentals. Transactions and users continue to expand in line with expectations and above expectations in our eCommerce unit. We also hit our marks in sales and new product launches. Ray will elaborate further in his operating report. Finally, we will discuss how our commitment to scale and agility allows us to excel, particularly in today's weakened economy. I will get to sink my teeth into this topic. What that, I would like to turn the call over to Cathy.

Good afternoon, everyone. Today, I'm going to review our first quarter 2008 financial results, as well as provide you with second quarter and updated full year 2008 guidance. For the first quarter, revenue and core net income were above the guidance we previously provided. Net loss available to common stockholders was at the top, and EBITDA was near the midpoint of our guidance ranges. These outstanding results were driven primarily by revenue from stronger than anticipated transaction growth in our eCommerce business. Our earnings measures were then impacted by unplanned accounting costs related to our year end tax work, which cost us $0.02 to $0.03 per share. For core net income and net loss available to common stockholders, these additional expenses were substantially, but not fully, offset by an associated tax benefit also arising from our year-end tax work. Both of our earnings per share measures showed significant growth in the first quarter compared to the same quarter of 2007. Core net income for the quarter was $1.5 million or $0.05 per share, compared to a loss of $0.01 per share for the prior year. Net loss available to common stockholders was $3.6 million or $0.12 per share, improved from a loss of $0.36 per share in 2007. These substantial year-over-year improvements reflect continued leverage in our business model and the successful integration of our acquisitions to drive revenue, realize cost synergies, and justify acquisition financing costs. EBITDA for the quarter was $7.4 million, 15% above EBITDA for the same quarter of 2007. There are two reasons that EBITDA growth was slower than the growth in our other earnings measures this quarter. First, by definition, it is a pre-tax measure, and so did not have the tax benefit to offset the unusually high accounting charges. Second, EBITDA absorbs the full…

Thanks, Cathy. In my comments, I will be referring to the operating data attached to the press release and the slides posted in the Press Room and Investor sections at orcc.com. I would like to focus on three things I particularly liked about the quarter and one concern that I had. Let's start with the highlights. First, our eCommerce team had a great quarter. Looking at slides one and two on the Web site, biller payment transactions were up 21% sequentially and 59% year over year. We are paid by the transaction in this side of our business, so the high transaction growth translates directly into revenue and earnings growth. What you can't tell from the numbers, and is particularly pleasing, is the growth isn't coming from just one area, but rather across the entire eCommerce biller products set. It's good to be hitting on all cylinders. A second highlight of the quarter is the Web-based collection service. We are especially encouraged by the continued growth in transactions and dollars collected. As I mentioned in the February call, we received two verbal agreements from household names that are in the final stages of contract edits, and already well along in implementation. The third highlight of the quarter was the completion of the data for banking expedited payments to our full service and Internet bill payment clients. That led to the simultaneous launch of the product in April to 485 client institutions serving over 800,000 bill payers, who can now make guaranteed same day or next day payments for a fee. Now, it's too early to tell what kind of results we will see, but in the first month or so, the take rate and the transaction volumes are within our product forecast, obviously, more to come later in the year…

That completes our first quarter performance report. We made great progress on a year-over-year basis, even after paying homage to the fair value accounting gods and an aggressive Federal Reserve. I'm pleased with our execution. Clients are happy, end user satisfaction is hitting record levels, new sales are strong and gaining momentum; transaction growth is healthy, new products are launching smoothly. Equally significant, it's reassuring to see the signs that our overarching, integrated network strategy is working. This is a strategy, accelerated in recent years by a number of strategic acquisitions that enables us to be both horizontally and vertically integrated, in essence, forming a matrix as described in slides five, six and seven with the benefits of both scale and agility. Thanks to our eCommerce acquisitions, Princeton eCom in 2006 and IPX in 2007, we are beginning to see some of the benefits of horizontal integration bridging our banking and commercial clients. At the same time, our 2005 acquisition of California-based Integrated Data Solutions has contributed mightily to our vertical integration capabilities, adding customized Internet banking, business banking, and account opening to our unmatched, fully integrated suite of web-based financial services. So, things went well, both operationally and strategically. It's taken an incredible amount of focus to get us this far, and I very much appreciate the confidence and persistence that both our staff and investors have shown. But the challenge continues. More than ever, with success in the web dependant on dual and diametrically opposed demands of scale and agility, focus is needed. This is hard stuff. Scale requires attention to cost and quality gained through lots of volume and a disciplined approach to processes. Agility requires flexibility, speed to market, and a willingness to assume some risk in order to pursue niche market opportunities. Scale without agility…

(Operator instructions) Josh Jabs, Roth Capital.

Cathy, can you quantify the impact of climbing interests rates has had on payment flow? Maybe what it was in Q1 and what you are expecting in Q2?

It's not so much what we are expecting. Think of it this way. We said for the full year that we were going to reduce – we thought it would have a net $2 million impact on us for the entire year. And that's net of some additional revenue that we thought was coming up. If you think about it this way, Josh, we are carrying somewhere in the neighborhood of $200 million in overnight balances. And that number isn't changing much. So, if you just want to look at the difference in interest rates, you can probably see what that is.

Okay. And your interest in other in Q1 was a bit higher than we had modeled. Is there something going on there or is that going to be pretty consistent throughout the year?

It should be reasonably consistent.

Okay. Then maybe one for Ray here, just wondering if you can give us an update on – I know you talked about a couple of the product that have actually launched now, but can you give us a little more color on some of the upcoming product launches, maybe the call center stuff that was (inaudible) debit and the rest of the products that are in data?

As you probably remember from our Analyst Day last year, we laid out a laundry list of things that we had on the drawing board in development or coming out. And candidly, I think we said then that some will work and some won't. What we have been doing over the last couple of quarters is talking about them as they come out, which is why we continue to talk about DCA and now we just started talking about banking expedited payments. But I really hate to tip my hand on anything that we have got coming up in the future to competition or anybody else.

One thing that we are particularly excited about Josh is business banking. As you may know, Online Resources' roots for many, many years were strictly on the retail side, and we outsourced the business banking side. We created our own product. It was betided, and then now is in actual launch here. And things are going well, and we expect that it will be – it's getting a lot of good customer, client receptivity. So, that's one area that I think we have talked about publicly.

Okay. It seems like the credit crisis has actually made the timing of your web-based collections tool pretty good here. And I guess I'm just wondering, with the rest of the upcoming product launches, has the macro environment changed how you are viewing those opportunities?

Yes, it has, and I hit on some of those remarks. Again, a little bit of a surprise to see account opening. We have always helped our clients drive their consumer adoption. So, having an integrated account opening capability of our own design and fully integrated with all our offering was always a key part to it. But I must say that with the attention towards sales costs, that we are getting much better receptivity on account opening than we otherwise expected. And I think Ray has also already outlined the continuing strong receptivity of our web collections. I think we are now, with these other two clients which are for all practical purposes, in process of being implemented, we are now 10 of the top 30 credit card issuers. We now have the largest debt collections that launched just in the first quarter. We are getting very good receptivity from the ITS client base. So, these are – and now starting seeing some further expressions of interest from other credit type services, including many of the banks and credit unions that we serve. So, we are finding that these cost-oriented products and services are doing quite well.

Okay. Great. Nice quarter. Thank you.

Your next question comes from the line of Wayne Johnson with Raymond James.

Good afternoon. Just a couple of housekeeping items. First, what was the EBITDA impact of the accounting expenses? Like, what was the actual negative dollar value impact?

Depending on how you look at it, Wayne, and what you attribute to it. It was somewhere in the neighborhood of $800,000 to $1 million.

Okay, and so that should not be recurring?

That should not be recurring. It's to $0.02 to $0.03 per share, and which is roughly $800,000, $900,000.

Okay. That's helpful. And just one thing that, Cathy, I think you were talking about the $200 million in overnight balances on the previous question. My question would be why isn't that dollar value growing if subscribers and transaction volume are? Is that the result of lost customers or why is that?

Actually, it's a result of speed of payments increasing. That's what we have seen over the last couple of years. It's a combination of electronic rate increasing and speed of payment on everything increasing. So, we have seen that even though our volumes keep increasing, the percentage of paper goes down and the speed of processing is going up. So, those things are seeming to offset one another.

Okay. That's helpful. Then could you discuss a little bit about or maybe this is better for Ray, the conversion rate of the backlog or the pipeline to enable customers? Is that progressing at the rate that you hoped it would? And I have a follow up question to that.

It depends on which side of the business you are looking at, if I understand the question correctly. In the eCommerce side, we now had five very strong sales quarters in a row. When you think about it, sales plus implementations equals transactions, and when you do that and you implement them faster, and you are selling some larger clients who have more payments to process in the first place, you get the kind of transaction growth that we are looking at. So, we got some practice at it and we are getting better at it. In other parts of our business, it doesn't seem to be slowing, but it doesn't seem to be getting any faster, either. And I think that's something that we are going to have to work on as a team.

Okay, so, let me ask a – that's helpful. Let me ask the question a different way. There hasn't been any slowdown or any resistance on behalf of the would-be customer to enabling them with your services after you have already been awarded the contract?

Actually, it's quite the contrary. It's hurry up, how fast can you do it? It's the age-old, we wait for the yes, and when we get the yes, it's okay, can you get it up tomorrow? And it doesn't work quite that way.

Okay. That's helpful. All right. Good quarter. Appreciate it.

Your next question comes from the line of Matt McCormack with FBR.

Yes. Hi, to follow up on the strong eCommerce volume, you did say you had five good solid quarters of sales. Can you talk about what industries you are seeing that's driving that? Or is it just somewhat broad based?

Matt, I think you hit the nail on the head. Certainly we are seeing it in the card business. Certainly we are seeing it in the asset receivable management client base that we acquired when we got ITS. But we are also starting to see it in other portfolios where delinquencies are rising. And you can't pick up a paper today without seeing that it's a card portfolio, it's health care, it's a backlog, it spills over into utilities. I mean, it's really in all the verticals that the eCommerce group is working in. So, while we have been focused in one area, card, that's where we started it's spreading to others as well.

Okay. Then Cathy, turning to the guidance, obviously there is a ramp of EBITDA margins in the back half of the year. Can you just remind us what gives you the confidence that that ramp will be achieved?

Certainly. You'll recall that if you watched us for a couple of years, Matt, as you have, that the first quarter is always a quarter where we see 4 to 5 percentage points decline in our EBITDA margin. So, that was not unusual to see this year, and then it was compounded, of course, by the accounting costs which will not recur, and of course, the impact of flow, which is dollar for dollar to that. We look at the growth in revenue and again, the leveraging over our fixed cost base, taking advantage of the leveragability that we have in the model. And looking forward to the end of the year, we still see being able to add those revenues over our base and come out where we had discussed with you guys earlier, when we gave guidance on our February call, which is about 26% by fourth quarter.

Okay. And the second quarter guidance is lower than the year ago in terms of the percentage midpoint. I think it's around 21%, 24%, 25% in the year-ago period. What's going on there?

Couple of things. Combination largely of loss of large clients that we had. When you take out large clients on a highly fixed cost base, it tends to magnify down. We don't lose any costs because of it. And the second – again, is looking at compared to it's float interest. Always remember that every dollar you lose of float revenue is a dollar lost of EBITDA. So, that had huge impact on the margin.

Okay. Then in terms of the balance sheet, as you mentioned, the cash did go down. Can you remind us of your liquidity position? I do believe you have a debt payment coming due this year, and I know you don't give free cash flow guidance, but is it safe to assume it will be similar to your core EPS?

We should be – we will generate significant cash, more cash, in fact, first quarter is generally not our highest cash generation quarter. So we have no concerns about servicing the amount of debt that the debt payments that we have for this year. We should generate significant cash over the next several quarters to be able to take care of that easily.

Okay. Thank you.

Your next question comes from the line of Brett Huff with Stephens, Inc.

Good afternoon. Nice quarter.

Thanks.

Just a couple of quick questions, on the competitive landscape, anything changing from the other competitors out there based on mergers and acquisitions and what they're going through?

We haven't seen anything yet. We know, obviously, check -free is well under process of integration into Fiserv. They are looking to get their bill pay services down into the community banks. But then again, we were seeing PayTRAX as a competitor all along with one of their affiliates where we are partnered. So, we really haven't seen anything there that would affect us. Some of the other companies that have been acquired also, no change from what we've reported last quarter. Again, they are focused on integration, whereas our focus is really on winning market share.

Okay. And then you had talked about looking at your costs just overall and broadly through this year. Is that process beginning? Or I know it's kind of going to be, maybe mid/late year if I remember correctly? Do you have an update on that?

Ray is continuously looking at costs for the company. So, you know, Brett, that there's not a day that goes by. He works for yours truly, and (inaudible). But on a strategic basis, that process, we decided to defer until the second quarter, when we would step back and take a strategic look at our costs, looking to simplify processes, looking to enhance the quality and then drive down costs. We have spent the first quarter instead of doing that on another priority, which is what we call one company, where we are trying to look to our clients as one company, although we might be selling multiple products from different divisions to that client. So, we put in an MIS system and added some CRM and changing some of our processes, which will also lead to lower costs. But the real strategic exercise won't occur until the second quarter, but we're very, very confident from just some of the ideas that has been generated so far, that this is going to be a very successful exercise, but not yet formalized.

Okay, and then last question, Cathy, I just wanted to make sure I got this right. The tax rate, do you have a cash tax rate expectation or guidance that you could give us?

Okay. If you'll recall, we are not paying anything other than AMP and state. So, we usually have talked about that somewhere in the 2% range from a cash tax standpoint.

Okay, that's what I need. That's all I had. Thank you.

(Operator instructions) Your next question comes from the line of Glenn Greene, Oppenheimer.

Hi, Glenn.

The first question is on the same store adoption, the 13.1% that looks like it was roughly flat sequentially. Could you just talk about that? It's the first time I can recall it being roughly flattish. Very unusual –?

Obviously, I saw that as the quarter was unfolding, too. It almost goes hand-in-hand with what I talked about. As it happens from time to time and typically at the end of the year, we have clients who clean up their user base, their inactive user base. And last quarter, quite by coincidence, we had several larger than normal cleanups occur. So, I went back and looked at previous quarters, and candidly, I think this is an anomaly and don't expect it to recur in the future. I might also point out, though, as I'm looking at the quarterly operating data chart, that while the adoption rate was flat, transactions for our full service clients, who typically make up the majority of those same-store client base, they were up quarter over quarter. So, it's encouraging to see that while we may have had some users cleaned out, it didn't affect usage. In fact, usage continued to grow.

Okay. The second question is for Cathy. If I'm looking at the payment services line and just looking at it sequentially, 1Q versus 4Q, it looked like it was up $2 million, yet the payments users were flattish sequentially. Transactions were up some, but it looked like most of the transaction growth was on the eCommerce side? I was just trying to reconcile the two and if there were any unusual items in the payment services line, i.e., termination fees or anything like that?

No. And we would never put termination fees in that line. That will always be in professional services. But what you are really seeing there is a combination of the eCom transaction growth being very high, and higher than we had expected in the first quarter. And what you are seeing on the banking side offsetting that is remember, that Jack Henry left in Q4. So, you are seeing a great deal of that increase in Q1 being driven out of the eCom side of the business, which matches with the metrics.

Okay. Then fourth or next question, is the 39 deals closed in the quarter, maybe this is for Ray, the 18 banking and 21 eCommerce, is there any way to either give us contract value or give us some kind of frame of reference for the order of magnitude of the deals – (inaudible)?

If I can give you a frame of reference, a couple of quarters ago, we said we are going to stop talking about numbers of clients because it really wasn't indicative as our business changed in the main drivers, which happen to be users adoptions and transactions. But anticipating this one, the fourth quarter, we sold 49 deals. It happened to be a very big quarter for us. As you remember, Jack Henry stopped sending us those small remittance services clients. So, while the number of sales went down, the value per went through the roof, as we started selling our own, in both eCommerce and banking. And in the fourth quarter, those were split 16 for eCommerce and 33 for banking, and we had several very large hosted full suite Internet banking sales, Q4. So, those are currently in implementation. And while we sold about 39 against 49, Q1 to Q4, they were actually worth more. So, the fact is what I pull out of that is we are selling to larger prospects, and which means they've more volume to begin with, and typically they will buy multiple products from us, too, instead of one or two things.

All right, great. I'll leave at that. Thank you.

Your next question comes from the line of Wayne Johnson with Raymond James.

Yes, just a quick reminder for myself. Were there any customer de-conversions in the first quarter of '08?

Towards the beginning of the CNE conversion at the very tail end, and that was completed in April. And then the second conversion was Certegy, and that was in April. So there was a little bit in the first quarter.

Okay. All right. Good. Fair enough. Nothing new there, and then Matt, if you could talk about your expectations for the expedited bill payment, it's been long on promise here for a number of years, and could you just provide some range of expectations for the year? And how did the first quarter '08 unfold for that service? And what were the lessons that were learned while it was in beta test?

Wayne, I guess it was about 11 years ago that I started talking about banking expedited payments, all sitting aside. I think we really started talking about expedited payments after we had purchased Princeton eCom. So we are – and of course, you know the history. We focused on the cost synergies first and then started deploying building the product, and one of the product and revenue synergies was expedited payments. So, we are right on the button in terms of the deployment to the group. I'm very pleased with the deployment. It had its usual bumps a couple of places here and there, but we did almost 500 of these banks. And they went very, very smoothly. As Ray mentioned, the actual usage was pretty much consistent with our forecast, Wayne, but I think I have been on record here as saying we lowered our forecast. Our expectations are very low this year for this product, as well they should. We are just still learning how to sell it, and we have done a nice job of getting it into the distribution channel for some of the full service and Internet banking providers. We need to now focus on getting banking expedited payments deployed to some of those that we are a remittance provider to. That's a challenge. So, we've got that ahead of us, and then we got to watch the consumers here and see how they do. I really feel reluctant to change our expectations, which are pretty modest this year. Again the back –.

Have you provided a dollar figure to that expectation?

Never. Never, and won't.

I thought I would try.

And candidly, the bet is in 2009, Wayne, and there I think we will have a better indication in the fall, where pay will have more water under the dam in terms of the consumer acceptance. But secondly, as I mentioned all along, we have always felt that we have got these number of new products working and you need to look at this on a portfolio basis before you start putting numbers out. So, bottom line is everything has moved on schedule, both in terms of forecast and deployment. That said, we just can't give you any more guidance in terms of the receptivity until later on this year.

Right, understood. I appreciate the response. My last follow up question is can you talk a little bit about the win/loss ratio for new business pitches? So, you talked about number of customers won in the first quarter, number of customers won in the fourth quarter, could you just give us a sense on what's the win rate ratio?

Wayne, the only ones I hear about are significant ones when we lose them. Right? I hear the sales bell ring, sometimes as far away as from here to Princeton, and I jump out of my chair and I go see what we won. But the only time anybody tells me about a lost sale is when it was significant, and no one has said boo to me since the first of the year.

So, does that mean that you are winning 90% of the pitches? 95% of the pitches?

No, no, no. You look at closed ratios, that's different from winning. Obviously, as you move to later stages of the sales process, your odds go up. When you get it all the way, I'll just pick a number, a stage 5, which is one away from closing the deal. Yes, now, you are talking 75%, 85%, 90% range. When you are just talking to people and making presentations and pitching your products and services and solutions, you are down in the 5%, 10%, 15%, 20% range. So –

Okay. So on that note, could you just give us without naming names, and if you want to name names, that's fine, but under what conditions do you feel that Online Resources has the best prospects for winning? And under which circumstances does Online Resources have a less favorable outlook for winning, either eCommerce, banking or the other services that you guys are pitching?

So, let me give it to you from the eCommerce side and the smaller community banking and credit union side first. The breadth, the integration, the single point of accountability of the product suite, all that's starting to resonate, obviously, those folks are looking for more than a single provider of a single service. They are trying to put more eggs in a single basket. Now that you have got adoption of these kinds of services of the front end, well north of 30%, it's important to have a robust and reliable, comprehensive suite of services that you can sell to your customers. Candidly, that goes right to our strength and our differentiation. When you look to the larger bank market, where best of breed typically plays, those folks are looking to give you pieces. You can think of certainly your top 20, 25, 50 institutions do lots of things in-house. As you move down, you find people still wanting highly customized solutions but don't necessarily want or need to run them themselves. So, they might allow you to host it. And that's where Matt actually, very briefly, touched on the acquisition of IDS in California. We now have an ASP environment, a hosted, highly configurable and customizable environment, and an on-premise solution for Internet banking and payment and small business and online lending and account opening and all these services. So, I think we have got a story that's resonating to the three markets that we serve.

Okay, I'll follow up off line. Thank you.

Your next question comes from the line of John Kraft with D.A. Davidson.

Hi, John.

Just a couple follow ups here, and I apologize, I don't have the release in front of me. But Cathy, the $0.02 to $0.03 in higher accounting charges, that has not been added back to the core net income, right? I mean, that would have meant that you would have had $0.07 or $0.08 core net income number?

Yes, that's not been added back.

Okay. And that was not anticipated when you provided original guidance for the year?

It was not. We did not anticipate the work that would have to the level of work that would be done around the evaluation allowance or the fact that having two accounting firms involved would up the time and the level of work to the degree that it did.

So, is it fair to say that that's part of the reason why the high end of the year guidance came down and maybe just better operating performance kept the low end where it was?

Not so much. Really the reason that the high end of the guidance just coming down because we would have been comfortable within the guidance range, with the exception of the fact that as we went through that year-end process of working through the release of valuation allowance, and timing things on that and really scrubbing that put us in the belief that our tax provision for full year 2008 is going to be higher than we had originally anticipated, and because of that, that really is the full $0.02. And remember, that's non-cash. We are not talking about paying it, we are just talking about what the technical tax provision will be on our books.

Fair. So, $0.02 extra then expected in GAAP –?

In GAAP taxes.

Okay. Then also just to clarify, I thought, Cathy, you said in the prepared remarks that there was a delay in the timing of these customer migrations. They stayed on a little bit longer, but then you also said that Jack Henry was completely gone at the end of Q4?

It was. Jack Henry was completely gone at the end of Q4. However, the two remaining clients that we had, that were departing, we had anticipated would depart during Q1, and both of them left in April. So, they stayed on slightly longer than we had anticipated.

Got you. And the timing of Jack Henry, though, specifically was when in Q4?

November and December.

Yes, it was spread over November and December, they phased off, but they were entirely gone by the end of the month of December.

Okay, great. Thanks, guys. That's it.

At this time, there are no audio questions. You may continue with your presentation or closing remarks.

I would like to thank everyone for participating in our call. I will now turn it back to Beth, who will read the final Safe Harbor statements.

As a reminder of our intent to take advantage of the Safe Harbor provisions, any statement in the preceding conference call that is not a statement of historical fact may be deemed to be a forward-looking statement. These statements include forecasts of growth in Online Resources' customer base, increases in the transaction fee and processed by customers, and growth of the number of consumers using online banking and bill paying services. Other forward-looking statements include those regarding Online Resources' business outlook for 2008 and beyond, and statements containing words such as anticipate, believe, plan, estimate, expect, seek, intend and another similar words that signify forward-looking statements. We encourage you to review Online Resources' detailed periodic filings with the Securities and Exchange Commission for full disclosure of risks and uncertainties. Thank you for joining us and this concludes our call.

This concludes today's conference call. You may now disconnect.