WSSI Websidestory (MM)

SAN DIEGO, Aug. 4 /PRNewswire-FirstCall/ -- WebSideStory, Inc. (NASDAQ:WSSI), a leading provider of digital marketing and analytics solutions, today announced the results of operations for the second quarter ended June 30, 2006. Financial and operating highlights for the quarter include: * Record non-GAAP revenue of $16.8 million, an increase of 79% over the comparable period last year on an as-reported basis and 40% on an organic basis. Non-GAAP revenue includes $1.6 million in deferred revenue related to the company's merger with Visual Sciences. * GAAP revenue of $15.2 million. * Record bookings for both the WebSideStory and Visual Sciences divisions, signing more than 130 new contracts for various modules of the WebSideStory and Visual Sciences suites and growing the enterprise customer base to approximately 1,400 worldwide. * Strong year-over-year organic revenue growth from all product lines, including 37% growth in the WebSideStory Division and 93% growth in the Visual Sciences Division. * Non-GAAP earnings per share of $0.10, compared to previously issued guidance of $0.10 to $0.13 per share. Non-GAAP earnings per share excludes stock-based compensation expenses, amortization of intangibles and other non-cash items described below. GAAP loss per share of $0.13, with a reconciliation provided in the table below. * The company's 11th consecutive quarter of positive cash generation and non-GAAP profitability, including non-GAAP net income of $2.0 million, which includes deferred revenue related to the Visual Sciences merger and excludes stock-based compensation, amortization of intangibles and other non-cash items. On a GAAP basis, the company reported a net loss of $2.4 million for the quarter. * Cash and investments balance at quarter end of approximately $17 million. * WebSideStory Search 4.0 being recognized with the Software & Information Industry Association's prestigious CODiE Award for Best Enterprise Search Engine. WebSideStory Search 4.0 introduced a number of industry first capabilities into the market, including Active Ranking -- a patent-pending capability that enables marketers to automatically drive site search results based on the full spectrum of web site behavioral data. "Second quarter 2006 was an exceptional sales execution and product delivery quarter. We generated record revenue, signed up a record number of new customers and achieved record new contract bookings for WebSideStory HBX Analytics, Visual Sciences and WebSideStory Search and Publish," said Jeff Lunsford, chairman and CEO of WebSideStory. "Our investments in innovative new products led to prestigious industry recognition. We experienced increased lead flow across all product suites as a result. We believe the strong momentum built in the second quarter will lead to solid revenue growth and margin expansion in the third quarter. We are especially pleased with the 93% growth generated by the Visual Sciences Division and with the innovative technology coming out of our HBX Analytics and WebSideStory Search development labs. We feel great about the health of our markets and the strength of our product and service lines. Our digital marketing solutions are part of a high-growth market sector which we believe will continue to fuel our expansion in the years ahead. We are also expanding our solution set to broaden our footprint within the enterprise and benefit from other product opportunities beyond the digital marketing stack." The company's guidance for the third quarter 2006 and full year 2006 is as follows: Financial Guidance Q3 2006 Full Year 2006 ----------------- ------------------ Revenue Guidance Low High Low High (millions) ------ ------ ------ ------ Estimated non-GAAP revenue range $17.9 $18.5 $68.0 $69.0 Deferred revenue related to Visual Sciences merger (1.4) (1.4) (5.0) (5.0) ------ ------ ------ ------ Estimated GAAP revenue range $16.5 $17.1 $63.0 $64.0 Earnings per share guidance Estimated non-GAAP EPS range $0.13 $0.14 $0.50 $0.52 Estimated amortization of intangibles (0.08) (0.08) (0.29) (0.29) Estimated stock-based compensation (0.15) (0.17) (0.55) (0.58) Deferred revenue related to Visual Sciences merger (0.07) (0.07) (0.25) (0.25) Estimated non-cash tax benefit 0.05 0.06 0.20 0.22 Estimated non-cash interest expense (0.01) (0.01) (0.05) (0.05) Effect of using non-GAAP dilutive shares (0.01) (0.01) (0.02) (0.03) ------ ------ ------ ------ Estimated GAAP EPS range $(0.14) $(0.14) $(0.46) $(0.46) Estimated shares used in per share calculations 20,200,000 20,200,000 20,065,000 20,065,000 Note on the Use of Non-GAAP Financial Measures Some of the financial measures in this press release, including some of our financial guidance, are non-GAAP financial measures within the meaning of SEC Regulation G. WebSideStory believes that this presentation is useful to investors because it more accurately describes the operating performance of the company on a period-to-period basis, excluding specific costs and expenses that we believe are not indicative of our core operating results. Company management uses these non-GAAP measures as important indicators of the company's past performance and to plan and forecast performance in future periods. In addition, bonus payments to our officers and employees under our corporate bonus plan are based on the achievement of specified non-GAAP revenue and non-GAAP EPS targets. Investors should not consider non-GAAP financial measures in isolation from, or in substitution for, financial information presented in compliance with GAAP. Conference Call and Webcast Information Management will host a quarterly conference call and simultaneous webcast to discuss the results Friday, August 4th, at 6:00 a.m. Pacific Time. To participate in the call, investors should dial 800-435-1398 (domestic) or 617-614-4078 (international) 10 minutes prior to the scheduled call. The passcode is 98436567. Additionally, a live audio-only webcast of the call may be accessed via the internet at http://www.websidestory.com/. An archived version of the webcast will also be available for at least twelve months, beginning two hours after the completion of the call, at the same location. Forward-Looking Statements Statements in this press release that are not a description of historical facts are forward-looking statements. You should not regard any forward- looking statement as a representation by WebSideStory that any of its plans will be achieved. Actual results may differ materially from those set forth in this release due to the risks and uncertainties inherent in WebSideStory's business, including, without limitation: WebSideStory's reliance on its web analytics services for the majority of its revenue; blocking or erasing of cookies or limitations on our ability to use cookies; WebSideStory's limited experience with digital marketing applications beyond web analytics; the risks associated with integrating the operations and products of Avivo Corporation and Visual Sciences, LLC with those of WebSideStory; privacy concerns and laws or other domestic or foreign regulations that may subject WebSideStory to litigation or limit our ability to collect and use Internet user information; WebSideStory's ability to defend itself against claims of patent infringement alleged by NetRatings, Inc.; WebSideStory's ongoing ability to protect its own intellectual property rights and to avoid violating the intellectual property rights of third parties; the highly competitive markets in which we operate that could make it difficult for WebSideStory to acquire and retain customers; the risk that WebSideStory's customers fail to renew their agreements; the risks associated with the company's indebtedness; the risk that WebSideStory's services may become obsolete in a market with rapidly changing technology and industry standards; and other risks described in WebSideStory's Securities and Exchange Commission filings, including WebSideStory's annual report on Form 10-K for the year ended December 31, 2005 and quarterly reports on Form 10-Q. Do not place undue reliance on these forward-looking statements which speak only as of the date of this news release. All forward-looking statements are qualified in their entirety by this cautionary statement, and WebSideStory undertakes no obligation to revise or update this news release to reflect events or circumstances after the date of this news release. About WebSideStory, Inc. Founded in 1996, WebSideStory, Inc. (NASDAQ:WSSI) is a leading provider of digital marketing and analytics solutions that improve online marketing, sales and business operations. Its WebSideStory division consists of web analytics, site search, web content management, and keyword bid management. WebSideStory also provides customer analytics solutions through its wholly owned subsidiary, Visual Sciences, LLC, a leading provider of streaming data analysis and visualization software. WebSideStory is headquartered in San Diego, California, and has European headquarters in Amsterdam, The Netherlands. For more information, contact WebSideStory. Voice: 858.546.0040. Fax: 858.546.0480. Address: 10182 Telesis Court, 6th Floor, San Diego, CA 92121. Web site: http://www.websidestory.com/. WebSideStory is a registered trademark of WebSideStory. Visual Sciences is a registered trademark of Visual Sciences, LLC. Other trademarks belong to their respective owners. WEBSIDESTORY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share data) June 30, December 31, 2006 2005 ----------- ----------- Assets Current assets Cash and cash equivalents $8,756 $19,968 Investments 8,222 11,712 Accounts receivable, net 12,771 7,842 Deferred tax assets 1,012 507 Prepaid expenses and other current assets 3,650 2,304 ----------- ----------- Total current assets 34,411 42,333 Property and equipment, net 5,737 2,532 Investments -- 3,276 Goodwill 46,119 21,286 Intangible assets, net 22,822 6,901 Deferred tax assets 11,737 9,166 Other assets 1,660 2,249 ----------- ----------- $122,486 $87,743 =========== =========== Liabilities and Stockholders' Equity Current liabilities Accounts payable $1,872 $877 Accrued liabilities 5,773 3,880 Deferred revenue 16,888 12,801 Capital lease short-term 67 83 Current maturities of notes payable 19,167 -- ----------- ----------- Total current liabilities 43,767 17,641 Capital lease long-term 64 90 Other liabilities 499 196 ----------- ----------- Total liabilities 44,330 17,927 ----------- ----------- Commitments and contingencies Stockholders' equity Preferred stock, $0.001 par value; 10,000,000 shares authorized and no shares issued and outstanding at June 30, 2006 and December 31, 2005 -- -- Common stock, $0.001 par value; 75,000,000 shares authorized, 18,515,538 and 18,401,180 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively 19 18 Additional paid-in capital 126,803 114,934 Unearned stock-based compensation (70) (630) Accumulated other comprehensive income 187 103 Accumulated deficit (48,783) (44,609) ----------- ----------- Total stockholders' equity 78,156 69,816 ----------- ----------- $122,486 $87,743 =========== =========== WEBSIDESTORY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(in thousands, except share and per share data) Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Revenues Subscription, hosting and support $13,022 $8,802 $24,790 $15,703 License 477 -- 728 -- Professional services 1,135 193 1,894 238 Advertising 611 417 1,276 428 ---------- ---------- ---------- ---------- Total revenues 15,245 9,412 28,688 16,369 ---------- ---------- ---------- ---------- Cost of revenues* Cost of revenue 4,021 1,633 7,157 2,640 Amortization of intangible assets 715 59 1,217 59 ---------- ---------- ---------- ---------- Total cost of revenues 4,736 1,692 8,374 2,699 ---------- ---------- ---------- ---------- Gross profit 10,509 7,720 20,314 13,670 Operating expenses* Sales and marketing 6,946 3,584 12,884 6,552 Technology development 3,347 1,258 6,019 2,009 General and administrative 3,290 1,500 5,983 2,784 Amortization of intangibles 830 202 1,543 202 ---------- ---------- ---------- ---------- Total operating expenses 14,413 6,544 26,429 11,547 ---------- ---------- ---------- ---------- (Loss) income from operations (3,904) 1,176 (6,115) 2,123 Interest expense (462) (10) (769) (18) Interest income 136 210 293 392 Other expense -- (51) -- (51) ---------- ---------- ---------- ---------- (Loss) income before provision for income taxes (4,230) 1,325 (6,591) 2,446 (Benefit from) provision for income taxes (1,798) 64 (2,404) 117 ---------- ---------- ---------- ---------- (Loss) income before cumulative effect of change in accounting principle (2,432) 1,261 (4,187) 2,329 Cumulative effect of change in accounting principle (net of tax) -- -- 13 -- ---------- ---------- ---------- ---------- Net (loss) income $(2,432) $1,261 $(4,174) $2,329 ========== ========== ========== ========== Basic net (loss) income per share: (Loss) income before cumulative effect of change in accounting principle $(0.13) $0.07 $(0.23) $0.14 Cumulative effect of change in accounting principle -- -- -- -- ---------- ---------- ---------- ---------- Basic net (loss) income per share $(0.13) $0.07 $(0.23) $0.14 ========== ========== ========== ========== Diluted net (loss) income per share: (Loss) income before cumulative effect of change in accounting principle $(0.13) $0.07 $(0.23) $0.13 Cumulative effect of change in accounting principle -- -- -- -- ---------- ---------- ---------- ---------- Diluted net (loss) income per share $(0.13) $0.07 $(0.23) $0.13 ========== ========== ========== ========== Shares used in per share calculations: Basic 18,476,579 17,102,147 18,438,282 16,279,067 ========== ========== ========== ========== Diluted 18,476,579 18,458,741 18,438,282 17,702,131 ========== ========== ========== ========== Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2006 2005 2006 2005 --------- --------- --------- --------- (*) Stock-based compensation: Cost of revenues $564 $19 $975 $21 Sales and marketing 974 54 1,760 88 Technology development 693 171 1,243 173 General and administrative 664 93 1,152 237 WebSideStory, Inc. Reconciliation of GAAP Three months ended Six months ended net (loss) income ---------------------- --------------------- attributable to June 30, June 30, June 30, June 30, common stockholders 2006 2005 2006 2005 to Non-GAAP net income --------- --------- --------- --------- (in thousands) Unaudited Unaudited Unaudited Unaudited Net (loss) income $(2,432) $1,261 $(4,174) $2,329 Amortization of intangibles 1,545 261 2,760 261 Stock-based compensation 2,895 337 5,130 519 Deferred revenue related to Visual Sciences merger * 1,583 -- 2,688 -- Non-cash tax (benefit) (1,872) -- (2,547) -- Non-cash interest expense 256 -- 427 -- Cumulative effect of change in accounting principle -- -- (13) -- --------- --------- --------- --------- Non-GAAP net income $1,975 $1,859 $4,271 $3,109 --------- --------- --------- --------- Reconciliation of GAAP (loss) income per share to Non-GAAP income per share GAAP (loss) income per share attributable to common stockholders Basic $(0.13) $0.07 $(0.23) $0.14 Diluted $(0.13) $0.07 $(0.23) $0.13 Amortization of intangibles 0.08 0.01 0.14 0.02 Stock-based compensation 0.15 0.02 0.26 0.03 Deferred revenue related to Visual Sciences merger * 0.08 -- 0.14 -- Non-cash tax (benefit) (0.09) -- (0.13) -- Non-cash interest expense 0.01 -- 0.02 -- Effect of using non-GAAP dilutive shares -- -- 0.02 -- Cumulative effect of change in accounting principle -- -- -- -- --------- --------- --------- --------- Non-GAAP net income per share attributable to common stockholders: Diluted $0.10 $0.10 $0.22 $0.18 GAAP weighted-average number of shares used in per share amounts: Basic 18,476,579 17,102,147 18,438,282 16,279,067 Diluted 18,476,579 18,458,741 18,438,282 17,702,131 Non-GAAP weighted- average number of shares used in per share amounts: Basic 18,476,579 17,102,147 18,438,282 16,279,067 Diluted 19,785,822 18,458,741 19,779,365 17,702,131 WebSideStory, Inc. Reconciliation of GAAP Three months ended Six months ended revenue to ---------------------- --------------------- Non-GAAP revenue June 30, June 30, June 30, June 30, (in thousands) 2006 2005 2006 2005 --------- --------- --------- --------- Unaudited Unaudited Unaudited Unaudited GAAP revenue $15,245 $9,412 $28,688 $16,369 Deferred revenue related to Visual Sciences merger * 1,583 -- 2,688 -- ---------------------- --------------------- Non-GAAP revenue $16,828 $9,412 $31,376 $16,369 ---------------------- --------------------- ------------------------------------------ * In accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations," the deferred revenue obligation on the ending balance sheet of Visual Sciences was reduced to fair value when recorded on the beginning balance sheet within WebSideStory. This fair value adjustment resulted in a write-down of $5.4 million of deferred revenue which would otherwise have been recognized as revenue by Visual Sciences on a stand-alone basis in periods subsequent to the merger date. DATASOURCE: WebSideStory, Inc. CONTACT: Erik Bratt, +1-858-546-0040 ext. 365, , or Jeff Lunsford, CEO, +1-858-546-0040 ext. 388, or Claire Long, CFO, +1-858-546-0040 ext. 387, all of WebSideStory, Inc. Web site: http://www.websidestory.com/

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