RAINMAKER REPORTS RECORD FIRST QUARTER REVENUE

Campbell, Calif., May 10, 2007 – Rainmaker Systems, Inc. (NASDAQ: RMKR), a leading provider of sales and marketing solutions combining hosted application software and execution services, today reported financial results for the 2007 first quarter ended March 31, 2007.
First Quarter Financial Highlights:

• Revenue increased to a record $16.3 million
  
• GAAP net income of $555,000, or $0.03 per diluted share
  
• Non-GAAP net income of $1.4 million, or $0.08 per diluted share
  
• Cash and cash equivalents of $19.6 million
  

Rainmaker achieved record first quarter net revenue of $16.3 million, representing a 47% increase over net revenue of $11.1 million in the first quarter of 2006 and a 13% sequential increase from net revenue of $14.4 million in the fourth quarter of 2006.

Gross margin was 49% in the first quarter of 2007, compared to 50% in the first quarter of 2006, and 51% in the fourth quarter of 2006.

First quarter GAAP net income was $555,000, or $0.03 per diluted share, compared to GAAP net income of $820,000, or $0.06 per diluted share, for the first quarter of 2006, and GAAP net income of $943,000, or $0.06 per diluted share, in the fourth quarter of 2006.

EBITDA in the first quarter was $1.7 million, or 10% of net revenue, compared to EBITDA of $1.5 million in the first quarter of 2006 and EBITDA of $1.9 million in the fourth quarter of 2006. See Exhibit A for a reconciliation of GAAP net income to EBITDA.

First quarter non-GAAP net income was $1.4 million, or $0.08 per diluted share. Non-GAAP net income excludes stock based compensation of $314,000, amortization of intangible assets from acquisitions of $643,000, and net revenue adjustments related to fair value purchase accounting of $77,000, net of the tax effect of these adjustments of $193,000. This compares to non-GAAP net income of $1.1 million, or $0.08 per diluted share, for the first quarter of 2006, and non-GAAP net income of $1.7 million, or $0.11 per diluted share, in the fourth quarter of 2006. See Exhibit B for a reconciliation of GAAP net income to non-GAAP net income.

The effective tax rate for the first quarter was approximately 18.7%.

First quarter 2007 diluted EPS results are based on 16.5 million weighted average shares outstanding, calculated using the treasury stock method.

Total shares outstanding at March 31, 2007 were approximately 15.2 million common shares, including 0.4 million restricted stock awards. In addition, Rainmaker had 2.9 million unexercised options and warrants with a weighted average exercise price of approximately $4.68 per share.

Total cash and cash equivalents at March 31, 2007 was $19.6 million, compared with $22 million at December 31, 2006. The Company closed the acquisition of CAS Systems in January 2007, using $1.5 million in cash, net of cash acquired at closing.

Recent Business Highlights

• Selected by global IT management software provider for lead development
  
• Global software manufacturer client renewed agreement for contract sales for multi-year term
  
• Fortune 50 hardware client extended agreement for lead development
  
• Tier 1 wireless and data services client expanded agreement for lead development
  
• Global online employment solutions client extended agreement for training sales
  
• Closed follow-on public offering of common stock in April, raising net proceeds of approximately $27.3 million
  

Business Update
“Our record first quarter revenue reflects strong growth and continued strong momentum in cross selling and expansion opportunities with our expanding client base,” said Michael Silton, CEO of Rainmaker Systems. “We are making significant progress in building our technology and capabilities to further leverage our unique strengths and better serve our clients. Proceeds from our recent successful follow-on public offering strengthen our balance sheet and provide additional resources to support our growth strategy of enhancing our technology and solutions, furthering our international expansion and selectively pursuing strategic acquisitions.”

Financial Guidance
The Company is reaffirming its previously stated financial guidance to grow 2007 revenue to $65 million to $67 million, representing growth of approximately 33% to 37% from 2006. For the second quarter of 2007, Rainmaker estimates revenue to be up significantly from its prior year second quarter and to be down slightly from its seasonally strong first quarter. Based on the Company's near-term expansion opportunities with existing clients, including international activities, Rainmaker is continuing its significant investment in technology and development during the second quarter, as previously stated. Also, as previously stated, the Company is increasing its spending in the second quarter related to Section 404 of the Sarbanes-Oxley Act. Accordingly, the Company could report in the range of a small GAAP net profit to a small GAAP net loss for the quarter ending June 30, 2007.

Conference Call
Rainmaker Systems will host a conference call and webcast today at 1:30 p.m. Pacific Time to discuss its fiscal 2007 first quarter results. Those wishing to participate in the live call should dial (800) 218-4007 using the password “Rainmaker.” A replay of the call will be available for one week beginning approximately one hour after the call’s conclusion by dialing (800) 405-2236 and entering 11088120 followed by the “#” key when prompted for a code. To access the live webcast of the call, go to the Investor Relations section of Rainmaker’s website at www.rmkr.com. A webcast replay of the conference call will be available for one year on the Calls/Events page of the Investor Relations section at www.rmkr.com.

Discussion of Non-GAAP Financial Measures
Rainmaker Systems’ management evaluates and makes operating decisions using various performance measures. In addition to GAAP results, Rainmaker also considers adjusted net income and adjusted net income per share, which are referred to as non-GAAP net income and non-GAAP net income per share, and EBITDA. These non-GAAP measures are derived from the revenue generated by Rainmaker’s business and the costs directly related to the generation of that revenue, such as costs of services, sales and marketing expenses, technology expenses and general and administrative expenses, that management considers in evaluating the Company’s operating performance. Non-GAAP net income, non-GAAP net income per share and EBITDA exclude certain expenses that management does not consider to be related to the Company’s core operating performance.

Non-GAAP net income consists of net income including an adjustment intended to reflect the full amount of revenue on assumed contracts in connection with acquisitions and excluding equity plan-related compensation expenses and amortization of purchased intangible assets. For purposes of comparability across other periods and against other companies in our industry, non-GAAP net income is adjusted by the amount of additional taxes that Rainmaker would accrue using a normalized effective tax rate applied to the non-GAAP results. The net revenue adjustment was $77,000 for the three months ended March 31, 2007 and related primarily to contracts assumed in connection with Rainmaker’s acquisition of ViewCentral in September 2006 and to a lesser extent its acquisition of CAS Systems in January 2007. Stock compensation adjustments were $314,000 for the three months ended March 31, 2007 and related to option award and restricted stock awards granted since the adoption of FASB Statement No. 123R, Share Based Payments, in January 2006. Amortization of intangible assets was $643,000 for the three months ended March 31, 2007 and related primarily to the prior acquisitions of Sunset Direct, Launch Project, Metrics Corp, ViewCentral and CAS Systems. The tax effect of these adjustments was an expense of $193,000 for the three months ended March 31, 2007.

EBITDA consists of net income excluding interest income or expense, income taxes, depreciation and amortization. Interest and other income was $129,000 for the three months ended March 31, 2007 and related primarily to interest earned on cash deposits offset by interest expense on term loans. Provision for income taxes was $128,000 for the three months ended March 31, 2007. Non-cash charges for depreciation of property and equipment was $497,000 for the three months ended March 31, 2007. Non-cash charges for amortization of acquisition related intangibles was $643,000 for the three months ended March 31, 2007 and related primarily to our prior business acquisitions.

Non-GAAP net income, non-GAAP net income per share and EBITDA are supplemental measures of Rainmaker’s performance that are not required by, or presented in accordance with, GAAP. Moreover, they should not be considered as an alternative to any performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of liquidity. Rainmaker presents non-GAAP net income, non-GAAP net income per share and EBITDA because management considers them to be important supplemental measures of Rainmaker’s operating performance and profitability trends, and because management believes they give investors useful information on period-to-period performance as evaluated by management. Rainmaker believes that the use of these non-GAAP measures provides consistency and comparability with Rainmaker’s past financial reports and also facilitates comparisons with other companies in Rainmaker’s industry, a number of which use similar non-GAAP financial measures to supplement their GAAP results. Management has historically used non-GAAP net income, non-GAAP net income per share and EBITDA when evaluating operating performance because management believes that the inclusion or exclusion of the items described above provides an additional measure of the company’s core operating results and facilitates comparisons of the company’s core operating performance against prior periods and the Company’s business model objectives. Rainmaker has chosen to provide this information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluation of the Company’s ongoing core operations.

About Rainmaker
Rainmaker Systems, Inc. delivers sales and marketing solutions, combining hosted application software and execution services designed to drive more revenue for our clients. Our Revenue Delivery Platform(SM) combines proprietary, on-demand application software and advanced analytics with specialized sales and marketing execution services. Rainmaker clients include large enterprises in a range of industries, including computer hardware and software, telecommunications, and financial services industries. For more information, visit www.rmkr.com or call 800-631-1545.

NOTE: Rainmaker Systems, the Rainmaker logo, Sunset Direct and Contract Renewals Plus are registered with the U.S. Patent and Trademark Office. All other service marks or trademarks are the property of their respective owners.

This press release contains forward-looking statements regarding future events. These forward-looking statements are based on information available to Rainmaker as of this date and they assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance, and actual results could differ materially from current expectations. Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are general market conditions, unfavorable economic conditions, our ability to execute our business strategy, our ability to integrate acquisitions without disruption to our business, the effectiveness of our sales team and approach, our ability to target, analyze and forecast the revenue to be derived from a client and the costs associated with providing services to that client, the date during the course of a calendar year that a new client is acquired, the length of the integration cycle for new clients and the timing of revenues and costs associated therewith, our client concentration given that we are currently dependent on a few significant client relationships, potential competition in the marketplace, the ability to retain and attract employees, market acceptance of our service programs and pricing options, our ability to maintain our existing technology platform and to deploy new technology, our ability to sign new clients and control expenses, the possibility of the discontinuation and/or realignment of some client relationships, and the financial condition of our clients’ businesses, and other factors detailed in the Company's filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q.


Steve Valenzuela
Chief Financial Officer
Rainmaker Systems, Inc.
(408) 626-2439
steve.valenzuela@rmkr.com

Todd Kehrli or Jim Byers
Investor Relations
MKR Group, Inc.
(323) 468-2300
rkmr@mkr-group.com