CORRECTED VERSION - WebSideStory Reports Record Third Quarter 2006 Financial Results

SAN DIEGO, Nov. 6  /PRNewswire-FirstCall/ -- Explanatory Note:  This press release has been issued to correct a $154,000 error in the amounts recorded for deferred tax assets and benefit from income taxes, which changed basic and diluted GAAP net loss per share from $0.09 to $0.10, for the third quarter of 2006.  Non-GAAP net income and non-GAAP earnings per share for the third quarter did not change as a result of this correction.

WebSideStory, Inc. (NASDAQ:WSSI), a leading provider of digital marketing and analytics solutions, today announced the results of operations for the third quarter ended September 30, 2006.  Financial and operating highlights for the quarter include:

  *  Non-GAAP earnings per share of $0.16, compared to previously issued
     guidance of $0.13 to $0.14 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 $0.10
     with a reconciliation provided in the table below.

  *  Non-GAAP revenue of $18.9 million, which compares favorably to
     previously issued guidance of $17.9 million to $18.5 million.  Non-GAAP
     revenue includes $1.5 million in deferred revenue related to the
     company's merger with Visual Sciences.

  *  GAAP revenue of $17.4 million.

  *  Strong year-over-year organic revenue growth from all product lines,
     yielding 34% growth company-wide, highlighted by 65% growth in the
     Visual Sciences Division.

  *  The company's 12th consecutive quarter of positive cash generation,
     adding $2.4 million in cash to the balance sheet, raising cash and
     short-term investments at quarter end to $19.4 million.

  *  85 new bookings for various modules of the WebSideStory and Visual
     Sciences suites, expanding the enterprise customer base to
     1,450 worldwide.

  *  KMWorld Magazine named WebSideStory Search 4.0 one of its Trend-Setting
     Products of the Year.  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.

  *  WebSideStory was named one of the 50 fastest growing software companies
     in the U.S. by Baseline Magazine.

  *  The announcement of new, industry leading Web 2.0 solutions, including
     Active Browsing, a patent-pending capability that enables any site to
     use Ajax to optimize site search results.



"WebSideStory is performing very well across the board.  HBX Analytics, Search and Publish continue to grow at healthy rates, and Visual Sciences exceeded our internal projections," said Jim MacIntyre, who will take over as WebSideStory's CEO on November 20, 2006.  "WebSideStory continues to differentiate from point solution providers, offering an integrated suite of online marketing optimization solutions.  Our recent ActiveInsights user forum was a defining event for the industry, where customers using two or more of our solutions, such as WebSideStory Search and HBX Analytics, stood on stage and validated the power of our integrated offerings with powerful return-on-investment success stories.  I am proud and excited to be taking over for Jeff Lunsford as WebSideStory's new CEO.  I look forward to working with our new chairman, Bill Harris, and the whole WebSideStory team as we continue our record of growth and innovation."

"The strength in earnings was a direct result of the strength in revenue, combined with our operating team doing a good job keeping costs in line across the board," said Claire Long, Chief Financial Officer for WebSideStory.  "We enjoyed robust margin expansion, up to a 17 percent net margin from 12 percent last quarter, and continued driving the company toward our goals for 2007.  We ended the quarter with approximately $19.4 million in cash and investments, which does not include an additional $400,000 committed to a letter of credit for Visual Sciences' new offices.  We currently expect to have between $23 and $25 million of cash-on-hand by the end of March 2007."

"I am proud to have helped build such a differentiated market leader as WebSideStory -- one that continues to innovate and produce stellar results like the Q3 results we announced today," said Jeff Lunsford, WebSideStory's outgoing CEO.  "We have built a world-class management team that will continue to grow this business and design innovative solutions for our global customer base."

The company's guidance for the fourth quarter 2006 and full year 2006 and 2007 is as follows:

                                    Q4 2006               Full Year 2006
  Revenue Guidance
   (millions)                  Low          High         Low          High

   Estimated non-GAAP
    revenue range             $19.2        $19.7        $69.6        $70.1
   Deferred revenue
    related to Visual
    Sciences merger            (1.0)        (1.0)        (5.1)        (5.1)
   Estimated GAAP revenue
    range                     $18.2        $18.7        $64.5        $65.0

  Earnings per share
   guidance
   Estimated non-GAAP
    EPS range                 $0.15        $0.16        $0.53        $0.54
   Estimated amortization
    of intangibles            (0.08)       (0.08)       (0.29)       (0.29)
   Estimated stock-based
    compensation              (0.17)       (0.15)       (0.58)       (0.56)
   Deferred revenue
    related to Visual
    Sciences merger           (0.05)       (0.05)       (0.26)       (0.26)
   Estimated non-cash
    tax benefit (expense)      0.05         0.04         0.24         0.23
   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)       (0.02)
   Estimated GAAP EPS
    range                    $(0.12)      $(0.10)      $(0.43)      $(0.41)
   Estimated shares
    used in per share
    calculations         20,500,000   20,500,000   20,000,000   20,000,000


                                                        Full Year 2007
  Revenue Guidance (millions)                         Low            High

   Estimated non-GAAP revenue range                  $89.5          $91.5
   Deferred revenue related to Visual Sciences
    merger                                            (0.2)          (0.2)
   Estimated GAAP revenue range                      $89.3          $91.3

  Earnings per share guidance
   Estimated non-GAAP EPS range                      $0.69          $0.74
   Estimated amortization of intangibles             (0.24)         (0.24)
   Estimated stock-based compensation                (0.48)         (0.38)
   Deferred revenue related to Visual Sciences
    merger                                           (0.01)         (0.01)
   Estimated non-cash tax benefit (expense)           0.02          (0.04)
   Estimated non-cash interest expense               (0.01)         (0.01)
   Effect of using non-GAAP dilutive shares          (0.01)            --

   Estimated GAAP EPS range                         $(0.04)         $0.06

   Estimated shares used in per share
    calculations                                22,125,000     22,125,000


  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.

Quarterly Conference Call and Webcast Information

As previously announced, management will host a quarterly conference call and simultaneous webcast to discuss WebSideStory's third quarter results at 1:30 p.m. PST on Nov. 6.  To participate in the call, investors should dial 866.700.7441 (domestic) or 617.213.8839 (international) 10 minutes prior to the scheduled call.  The passcode is 26500360.  Additionally, a live audio-only webcast of the call may be accessed via the Internet at http://www.websidestory.com/ir.

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: [phone].  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)

                                                September 30, December 31,
                                                    2006          2005
  Assets
  Current assets
   Cash and cash equivalents                       $10,050        $19,968
   Investments                                       9,320         11,712
   Accounts receivable, net                         14,468          7,842
   Deferred tax assets                               2,572            507
   Prepaid expenses and other current assets         3,858          2,304
    Total current assets                            40,268         42,333

  Property and equipment, net                        6,260          2,532
  Investments                                           --          3,276
  Goodwill                                          49,759         21,286
  Intangible assets, net                            21,277          6,901
  Deferred tax assets                               11,737          9,166
  Other assets                                       1,508          2,249
                                                  $130,809        $87,743
  Liabilities and Stockholders' Equity
  Current liabilities
   Accounts payable                                 $1,808           $877
   Accrued liabilities                               7,584          3,880
   Deferred revenue                                 17,649         12,801
   Capital lease short-term                             50             83
   Current maturities of notes payable              19,432             --
    Total current liabilities                       46,523         17,641

  Capital lease long-term                               56             90
  Other liabilities                                    604            196
    Total liabilities                               47,183         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
    September 30, 2006 and December 31, 2005            --             --
   Common stock, $0.001 par value;
    75,000,000 shares authorized, 18,879,509
    and 18,401,180 shares issued and
    outstanding at September 30, 2006 and
    December 31, 2005, respectively                     19             18
   Additional paid-in capital                      133,937        114,934
   Unearned stock-based compensation                   (46)          (630)
   Accumulated other comprehensive income              326            103
   Accumulated deficit                             (50,610)       (44,609)
    Total stockholders' equity                      83,626         69,816
                                                  $130,809        $87,743


    WEBSIDESTORY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
       (UNAUDITED) (in thousands, except share and per share data)

                          Three Months Ended          Nine Months Ended
                             September 30,              September 30,
                           2006         2005         2006         2005
  Revenues
   Subscription, hosting
    and support          $13,877      $10,341      $38,700      $26,043
   License                 1,332           --        2,027           --
   Professional services   1,681          368        3,575          607
   Advertising               557          628        1,834        1,056
    Total revenues        17,447       11,337       46,136       27,706

  Cost of revenues*
   Cost of revenue         4,287        1,979       11,445        4,619
   Amortization of
    intangible assets        715           67        1,931          126
    Total cost of
     revenues              5,002        2,046       13,376        4,745

   Gross profit           12,445        9,291       32,760       22,961

  Operating expenses*
   Sales and marketing     6,852        3,934       19,738       10,485
   Technology development  3,384        1,342        9,403        3,351
   General and
    administrative         4,014        1,886        9,997        4,669
   Amortization of
    intangible assets        830          515        2,372          717
    Total operating
     expenses             15,080        7,677       41,510       19,222

  (Loss) income from
   operations             (2,635)       1,614       (8,750)       3,739

   Interest expense         (505)          (8)      (1,274)         (26)
   Interest income           161          241          454          633
   Other expense               2           --            2          (51)

  (Loss) income
   before provision
   for income taxes       (2,977)       1,847       (9,568)       4,295

  (Benefit from)
   provision for
   income taxes           (1,150)          88       (3,554)         205

  (Loss) income
   before cumulative
   effect of change
   in accounting
   principle              (1,827)       1,759       (6,014)       4,090

  Cumulative effect of
   change in accounting
   principle (net of tax)     --           --           13           --

    Net (loss) income    $(1,827)      $1,759      $(6,001)      $4,090

  Basic net (loss)
   income per share:
   (Loss) income before
    cumulative effect
    of change in
    accounting principle  $(0.10)       $0.10       $(0.32)       $0.24
   Cumulative effect of
    change in accounting
    principle                 --           --           --           --
  Basic net (loss)
   income per share       $(0.10)       $0.10       $(0.32)       $0.24

  Diluted net (loss)
   income per share:
   (Loss) income before
    cumulative effect
    of change in
    accounting
    principle             $(0.10)       $0.09       $(0.32)       $0.22
   Cumulative effect of
    change in accounting
    principle                 --           --           --           --
  Diluted net (loss)
   income per share       $(0.10)       $0.09       $(0.32)       $0.22

  Shares used in per
   share calculations:
   Basic              18,737,879   18,093,867   18,540,356   16,890,651
   Diluted            18,737,879   19,756,635   18,540,356   18,398,107


  (*)  Stock-based compensation:

                                  Three Months Ended      Nine Months Ended
                                    September 30,          September 30,
                                   2006      2005        2006       2005
  Cost of revenues                 $601       $24        $1,576      $45
  Sales and marketing             1,000        53         2,760      141
  Technology development            676        48         1,919      221
  General and administrative        666        94         1,818      331




WebSideStory, Inc. (unaudited) (in thousands, except share and per share data)

  Reconciliation
   of GAAP net
   (loss) income
   attributable
   to common
   stockholders       Three months ended            Nine months ended
   to Non-GAAP   September 30,  September 30,  September 30,  September 30,
   net income         2006           2005           2006           2005

   Net (loss)
    income          $(1,827)        $1,759        $(6,001)        $4,090

   Amortization
    of intangibles    1,545            582          4,303            843

   Stock-based
    compensation      2,943            219          8,073            738

   Deferred revenue
    related to
    Visual Sciences
    merger *          1,456             --          4,144             --

   Non-cash tax
    (benefit)        (1,182)            --         (3,729)            --

   Non-cash
    interest expense    265             --            692             --

   Cumulative effect
    of change in
    accounting
    principle            --             --            (13)            --

   Non-GAAP net
    income           $3,200         $2,560         $7,469         $5,671

  Reconciliation
   of GAAP (loss)
   income per share
   to Non-GAAP
   income per share

   GAAP (loss)
    income per
    share
    attributable
    to common
    stockholders
      Basic          $(0.10)         $0.10         $(0.32)         $0.24
      Diluted        $(0.10)         $0.09         $(0.32)         $0.22

   Amortization of
    intangibles        0.08           0.03           0.22           0.05

   Stock-based
    compensation       0.15           0.01           0.41           0.04

   Deferred revenue
    related to
    Visual Sciences
    merger *           0.07             --           0.21             --

   Non-cash tax
   (benefit)          (0.06)            --          (0.19)            --

   Non-cash interest
    expense            0.01             --           0.03             --

   Effect of using
    non-GAAP
    dilutive shares    0.01             --           0.02             --

   Cumulative effect
    of change in
    accounting
    principle            --             --             --             --

   Non-GAAP net
    income per
    share
    attributable
    to common
    stockholders:
     Diluted          $0.16          $0.13          $0.38          $0.31

   GAAP weighted-
    average number
    of shares used
    in per share
    amounts:
      Basic      18,737,879     18,093,867     18,540,356     16,890,651
      Diluted    18,737,879     19,756,635     18,540,356     18,398,107

   Non-GAAP
   weighted-
   average number
   of shares used
   in per share
   amounts:
      Basic      18,737,879     18,093,867     18,540,356      16,890,651
      Diluted    19,936,045     19,756,635     19,827,840      18,398,107


  WebSideStory, Inc. (unaudited) (in thousands)

  Reconciliation of
   GAAP revenue
   to Non-GAAP        Three months ended           Nine months ended
   revenue       September 30,  September 30,  September 30,  September 30,
                     2006           2005           2006           2005

   GAAP revenue    $17,447        $11,337        $46,136        $27,706

   Deferred
    revenue
    related to
    Visual
    Sciences
    merger *         1,456             --          4,144             --

   Non-GAAP
    revenue        $18,903        $11,337        $50,280        $27,706

  *  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, ext. 365, , or Claire

Long, CFO, ext. 387, both of WebSideStory, Inc., [phone]



Web site:  http://www.websidestory.com/

http://www.websidestory.com/ir 

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