« More 2001 Releases

MCLEAN, Va., October 24, 2001

Online Resources Corp. (Nasdaq: ORCC), a leading outsourcer of e-financial services, today reported financial and operating results for the three months ending September 30, 2001.

• Revenue for the third quarter of 2001 increased 52 percent to $6.4 million, compared to $4.2 million in the third quarter of 2000.
• Gross profit for the third quarter of 2001 was $2.8 million, compared to $850,000 in the third quarter of 2000.
• Operating loss for the third quarter of 2001 declined 59 percent to $1.9 million, compared to a loss of $4.6 million in the third quarter of 2000. Operating loss per share declined 59 percent to $0.16 per share, compared to $0.39 per share in the third quarter of 2000.
• Net loss in the third quarter 2001 declined to $0.26 per share, including a non-cash $0.08 per share one-time charge related to conversion of $2.5 million of the Company's convertible debt into equity. After adjusting for this item, net loss per share declined to $0.18 per share, a 53 percent decline over the third quarter of 2000, and exceeded by 14 percent the $0.21 per share loss consensus expectations.

"This is the Company's twenty-fourth consecutive quarter of year-over-year revenue growth of at least 30 percent. The fact that all our growth has been organic speaks to the strength of our client base and the people in our organization," stated Matthew P. Lawlor, chairman and chief executive officer of the Company. "This is also the sixth consecutive quarter of operating loss improvement, following a period of scale-up and heavy investment in consumer marketing programs. While revenue growth has moderated with the cooling economy, we expect our increasingly sophisticated CRM capabilities and cost control initiatives will lead to operating breakeven in mid to early 2002."

The Company reported that billable and total users increased by 63 and 60 percent, respectively, over the prior year, and 12 and 11 percent, respectively, over the prior quarter. In the future, the Company will only report billable users to better reflect those users who make a material contribution to recurring revenue. The Company processed 14.9 million transactions, a 99 percent increase over the prior year and 17 percent over the prior quarter. The Company also reported, for the first time, as reflected on the attached Quarterly Operating Data report, transaction levels and customer care contacts along product lines to clarify their contribution to revenue.

Consistent with Online Resources' strategy to focus on its existing client base of 520 financial institutions, the company signed 114 contracts in the quarter for additional products, upgrades and other services with this existing base, including 28 contracts for co-funded marketing programs, 27 client contracts that were renewed, and 11 new financial institution contracts.

The Company reported that its cost per transaction was reduced to $0.24, compared to $0.45 in the third quarter of 2000 and $0.28 in the second quarter of 2001. The Company's gross profit margin increased to 44 percent, its eleventh consecutive quarterly margin improvement, as recurring user fees were increasingly spread over the Company's relatively fixed cost base.

Lawlor added, "Our targeted marketing efforts launched in earnest late in the third quarter, with the initial campaigns geared at the base task of growing online banking and bill payment adoption. Future campaigns will be increasingly geared toward helping our clients generate profits from the cross-selling of customized products and services based on detailed customer account and transaction activity."

Fourth Quarter 2001 and Year 2002 Business Outlook
The following statements are forward-looking, and actual results may differ materially.

Fourth Quarter of 2001 and Full Year 2001

• The Company expects revenue to increase 8 to 11 percent versus the third quarter of 2001, and is reducing its full year 2001 revenue guidance to 60 to 62 percent growth over the prior year to reflect the impact of a weaker economy.
• Gross profit percentage is expected to improve to 46 to 48 percent in the fourth quarter, and the Company is increasing its gross profit margin guidance for full year 2001 to approximately 40 to 43 percent, to reflect lower than expected expenses resulting from its automation and cost control initiatives.
• Operating loss is expected to decline 25 to 35 percent versus the third quarter of 2001, and the Company is increasing the expected reduction in its losses to approximately 50 to 55 percent versus the prior year.
• Net loss per share, before any one-time charges, is expected to decline approximately 45 to 50 percent versus the third quarter of 2001, reflecting expected lower operating losses, changes in outstanding shares and lower debt expense.

Full Year 2002

The Company expects an operating profit in 2002, with operating breakeven reached by the end of the second quarter of 2002. Revenues in 2002 are expected to continue to grow strongly, but more moderately, than prior years. Overhead expenses are expected to be stable or declining, offset by the marginal cost of increased usage and transaction volume flowing through the Company's platform. More specifically:

• The Company expects revenue to increase approximately 28 to 32 percent versus the prior year. The Company's revenue outlook is based on its relatively large base of recurring revenue and current trend of increasing banking consumer adoption rates. The Company does not expect its distribution channel to expand significantly, given the slowdown in financial institution IT spending and the uncertainties related to some clients who may possibly bring a portion of the Company's services in-house or merge with financial institutions who have competing solutions.
• Gross profit percentage is expected to improve to approximately 52 to 55 percent. The Company's gross profit outlook is increased based on its model of leveraging recurring user fees over a relatively fixed cost base. Recent improvements in automating bill payment processes and lower sign-up costs result in a higher than previously expected gross profit percentage.
• The Company expects an operating profit of between $500,000 to $1,000,000 for 2002, or between $0.04 to $0.08 per share, and operating breakeven achieved by the end of the second quarter of 2002. The Company expects this to be achieved by the expansion in its gross profits and lower overhead spending resulting from recent steps to reduce staff size and expand the mix of stock-based compensation.

The Company will host a conference call discussing this announcement on Wednesday, October 24, 2001 at 4:45 p.m. EDT, which is open to the public by dialing 877-590-4770. The call will be recorded and available for playback at 8:00 p.m. EDT on October 24 until midnight on Wednesday, October 31 by dialing 800-642-1687 and entering code 1970376. The conference call will also be available via the Company's web site at www.orcc.com, along with the 2001 outlook.

About Online Resources
Online Resources (Nasdaq:ORCC - www.orcc.com) is a leading outsourcer of e-financial services, with over 500 bank and credit union clients. The company's comprehensive QuotienSM suite of services provides Internet banking, electronic bill payment-presentment, and other consumer and small business. e-finance applications. The company performs 24x7 customer care and consumer marketing services, giving clients the benefit of a single, integrated solution, backed by a unique end-to-end service guarantee and real-time transaction capabilities. Online Resources processes over 60 million transactions annually, including $3 billion in consumer bill payments.

This news release contains statements about future events and expectations, which are "forward-looking statements." Any statement in this release that is not a statement of historical fact may be deemed to be a forward-looking statement. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Specifically factors that might cause such a difference include, but are not limited to: the company's history of losses and anticipation of future losses; the company's dependence on the marketing efforts of third parties; the potential fluctuations in the company's operating results; the company's potential need for additional capital; the company's potential inability to expand the company's services and related products in the event of substantial increases in demand for these services and related products; the company's competition; the company's ability to attract and retain skilled personnel; the company's reliance on the company's patents and other intellectual property; the early stage of market adoption of the services it offers; consolidation of the banking and financial services industry; and those risks and uncertainties discussed in filings made by the company with the Securities and Exchange Commission, including those risks and uncertainties contained under the heading "Risk Factors" in the company's Form 10-K, latest 10-Q, and S-3 as filed with the Securities and Exchange Commission. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.

The following tables are best viewed with Internet Explorer.

• Quarterly Operating Data
• Statements of Operations
• Condensed Balance Sheets