WebSideStory Files Form 10-K With Audited Year End 2006 Financial Results

SAN DIEGO, March 13  /PRNewswire-FirstCall/ -- WebSideStory, Inc. (NASDAQ:WSSI), a leading provider of real-time customer intelligence solutions, today announced that it has filed its 2006 Form 10-K with the Securities and Exchange Commission.  The Form 10-K includes the Company's audited financial results for the year ended December 31, 2006.  WebSideStory had previously released preliminary, unaudited financial results for the quarter and year ended December 31, 2006 on February 26, 2007.  Changes from the preliminary, unaudited results issued on February 26, 2007 to the final quarter and year ended December 31, 2006 results included in the Form 10-K are highlighted below:

  *  Non-GAAP revenue of $19.4 million for the fourth quarter, compared to
     previously issued results of $19.2 million, and GAAP revenue of $18.4
     million, compared to previously issued results of $18.2 million.  For
     the year, non-GAAP revenue was $69.6 million, compared to previously
     issued results of $69.4 million, and GAAP revenue was $64.5 million,
     compared to previously issued results of $64.3 million.  The Company
     adjusted revenue and cost of goods sold primarily to record revenue and
     costs related to customer reimbursable travel and entertainment.
  *  Non-GAAP earnings per share of $0.17 for the fourth quarter and $0.55
     for the year remained unchanged.  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 $0.09 for
     the quarter, compared to previously issued results of a loss of $0.07
     per share, and GAAP loss per share of $0.41 for the year, compared with
     previously issued results of a loss of $0.40 per share.  The change in
     GAAP loss was primarily the result of an increase in stock based
     compensation expense.  The Company recorded an additional charge
     related to restricted stock grants issued in connection with the Visual
     Sciences merger.  The grant value and forfeiture rates were adjusted.
     The restricted stock units fully vested in the first quarter of 2007
     prior to the filing date.

  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 as a substitute for, financial information presented in compliance with GAAP.

About WebSideStory, Inc.

Founded in 1996, WebSideStory, Inc. (NASDAQ:WSSI) is a leading provider of real-time customer intelligence solutions. The services provided by WebSideStory and Visual Sciences deliver comprehensive insight into the lifetime of customer interactions across on-line and multi-channel businesses. More than 1,500 enterprises worldwide rely on the company for innovative solutions, enterprise-class services and a world-class network of partners to improve marketing, sales and operational performance. 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, Inc. Visual Sciences is a registered trademark of Visual Sciences, LLC, which is a wholly owned subsidiary of WebSideStory, Inc.

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 customer intelligence 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, including the risk of non-compliance with the covenants in our credit facility; 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, 2006 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.

                            WEBSIDESTORY, INC.
                       CONSOLIDATED BALANCE SHEETS
                               (UNAUDITED)
                    (in thousands, except share data)

                                                   December 31, December 31,
                                                        2006        2005
  Assets
  Current assets
    Cash and cash equivalents                         $19,713      $19,968
    Investments                                         5,606       11,712
    Accounts receivable, net                           15,654        7,842
    Deferred tax assets                                   708          507
    Prepaid expenses and other current assets           3,943        2,304
      Total current assets                             45,624       42,333

  Property and equipment, net                           6,562        2,532
  Investments                                              --        3,276
  Goodwill                                             49,380       21,286
  Intangible assets, net                               19,732        6,901
  Deferred tax assets                                  14,956        9,166
  Other assets                                          1,314        2,249
                                                     $137,568      $87,743

  Liabilities and Stockholders' Equity
  Current liabilities
    Accounts payable                                     $987         $877
    Accrued liabilities                                 9,327        3,880
    Deferred revenue                                   20,924       12,801
    Capital lease short-term                               38           83
    Current maturities of notes payable                19,708           --
      Total current liabilities                        50,984       17,641

  Capital lease long-term                                  50           90
  Other liabilities                                       781          196
      Total liabilities                                51,815       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 December 31, 2006 and
     December 31, 2005                                     --           --
    Common stock, $0.001 par value; 75,000,000 shares
     authorized, 19,238,781 and 18,401,180 shares
     issued and outstanding at December 31, 2006 and
     December 31, 2005, respectively                       19           18
    Additional paid-in capital                        137,862      114,934
    Unearned stock-based compensation                     (22)        (630)
    Accumulated other comprehensive income                219          103
    Accumulated deficit                               (52,325)     (44,609)
      Total stockholders' equity                       85,753       69,816
                                                     $137,568      $87,743



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


                                        Three Months Ended     Year Ended
                                            December 31,      December 31,
                                           2006     2005     2006     2005
  Revenues
   Subscription, hosting and support     $14,607  $10,689  $53,307  $36,732
    License                                1,497       --    3,524       --
    Professional services                  1,744      389    5,319      996
    Advertising                              543      668    2,377    1,724
      Total revenues                      18,391   11,746   64,527   39,452

  Cost of revenues*
    Cost of revenue                        4,838    1,955   16,283    6,574
    Amortization of intangible assets        715       76    2,646      202
      Total cost of revenues               5,553    2,031   18,929    6,776

    Gross profit                          12,838    9,715   45,598   32,676

  Operating expenses*
    Sales and marketing                    6,712    4,169   26,450   14,654
    Technology development                 3,421    1,604   12,824    4,955
    General and administrative             4,280    1,493   14,277    6,162
    Amortization of intangible assets        830      430    3,202    1,147
      Total operating expenses            15,243    7,696   56,753   26,918

  (Loss) income from operations           (2,405)   2,019  (11,155)   5,758

    Interest expense                        (491)      (8)  (1,765)     (34)
    Interest income                          242      272      696      905
    Other expense                              2       11        4      (43)
      Total other income                    (247)     275   (1,065)     828

  (Loss) income before provision for
   income taxes                           (2,652)   2,294  (12,220)   6,586

  (Benefit from) income taxes               (937)  (3,278)  (4,491)  (3,073)

  (Loss) income before cumulative effect
   of change in accounting principle      (1,715)   5,572   (7,729)   9,659

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

        Net (loss) income                $(1,715)  $5,572  $(7,716)  $9,659

  Basic net (loss) income per common
   share:
   (Loss) income before cumulative
    effect of change in accounting
    principle                             $(0.09)   $0.31   $(0.41)   $0.56
     Cumulative effect of change in
      accounting principle                    --       --       --       --
  Basic net (loss) income per common
   share                                  $(0.09)   $0.31   $(0.41)   $0.56

  Diluted net (loss) income per common
   share:
   (Loss) income before cumulative
    effect of change in accounting
    principle                             $(0.09)   $0.28   $(0.41)   $0.51
     Cumulative effect of change in
      accounting principle                    --       --       --       --
  Diluted net (loss) income per common
   share                                  $(0.09)   $0.28   $(0.41)   $0.51



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

                                 Three Months Ended        Year Ended
                                    December 31,           December 31,
                                  2006       2005        2006        2005
  Shares used in per share
   calculations:
      Basic                   19,086,837  18,242,596  18,678,099  17,231,411
      Diluted                 19,086,837  19,883,932  18,678,099  18,774,978

  (*) Stock-based compensation:

  Cost of revenues                  $783         $13      $2,359         $58
  Sales and marketing               1031          42       3,791         183
  Technology development             636         113       2,555         334
  General and administrative         901          92       2,719         423





WEBSIDESTORY, INC. (UNAUDITED) (in thousands, except share and per share data)

                                Three Months Ended          Year Ended
                                    December 31,            December 31,
                                  2006        2005         2006       2005
   Reconciliation of GAAP net
    (loss) income to Non-GAAP
    net income

    Net (loss) income           $(1,715)     $5,572      $(7,716)    $9,659

    Amortization of intangibles   1,545         506        5,848      1,349

    Stock-based compensation      3,351         260       11,424        998

    Deferred revenue related to
     Visual Sciences merger*        968          --        5,112         --

    Non-cash tax (benefit)/
     Recovery of NOL valuation
     reserve                       (972)     (3,417)      (4,701)    (3,417)

    Non-cash interest expense       276          --          968         --

    Other non-recurring expenses     --         209           --        209

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

  Non-GAAP net income            $3,453      $3,130      $10,922     $8,798

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

   GAAP net (loss) income per
    common share:
      Basic                      $(0.09)      $0.31       $(0.41)     $0.56
      Diluted                    $(0.09)      $0.28       $(0.41)     $0.51

  Amortization of intangibles      0.08        0.03         0.29       0.07

  Stock-based compensation         0.16        0.01         0.57       0.05

  Deferred revenue related to
   Visual Sciences merger          0.05          --         0.26         --

  Non-cash tax benefit/Recovery
   of NOL valuation reserve       (0.05)      (0.17)       (0.24)     (0.18)

  Non-cash interest expense        0.01          --         0.05         --

  Other non-recurring expenses       --        0.01           --       0.01

  Effect of using non-GAAP
   dilutive shares                 0.01          --         0.03         --

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

      Non-GAAP net income per
       common share:
         Diluted                  $0.17       $0.16       $0.55       $0.46

  GAAP weighted-average
   shares used in per share
   calculations:
      Basic                  19,086,837  18,242,596  18,678,099  17,231,411
      Diluted                19,086,837  19,883,932  18,678,099  18,774,978


  Non-GAAP weighted-average
   shares used in per share
   calculations:
      Basic                  19,086,837  18,242,596  18,678,099  17,231,411
      Diluted                20,387,831  19,883,932  19,963,868  18,774,978



  WEBSIDESTORY, INC. (UNAUDITED) (in thousands)

                                        Three Months Ended    Year Ended
                                           December 31,      December 31,
                                         2006     2005      2006     2005
   Reconciliation of GAAP revenue to
    Non-GAAP revenue

  GAAP revenue                          $18,391  $11,746  $64,527  $39,452

  Deferred revenue related to Visual
   Sciences merger*                         968       --    5,112       --

     Non-GAAP revenue                   $19,359  $11,746  $69,639  $39,452


  *  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: Claire Long of WebSideStory, Inc., [phone],





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

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