SAN DIEGO, CA (Feb. 1, 2006) -- WebSideStory, Inc. (Nasdaq: WSSI), a leading provider of on-demand digital marketing applications, today announced the acquisition of Visual Sciences, LLC and results of operations for the quarter ended December 31, 2005.

Fourth Quarter 2005 Results

Financial and operating highlights for the quarter include:

- Record revenue of $11.7 million, 79% higher than the $6.5 million generated in the fourth quarter of 2004.
- Record quarterly earnings per share of $0.25 (which includes the benefit of realizing a $3,003,000 deferred tax asset primarily related to net operating loss carry-forwards, or $0.15 per share) compared to a loss of $0.04 in the same period of 2004.
- Non-GAAP earnings per share was $0.15 (before stock-based compensation, amortization of intangibles and other non-recurring items) compared to non-GAAP earnings per share of $0.06 over the same period in 2004. Earnings per share in the fourth quarter of 2005 included amortization of intangibles of approximately $506,000, or $0.03 per share, and stock-based compensation expenses of approximately $237,000, or $0.01 per share. All per share numbers are expressed on a weighted average diluted share basis.
- Record cash generation, with $3.5 million added to the balance sheet in the quarter.
- Record pro forma pre-tax margins of 26%, up from 23% in Q3 2005.
- Record web analytics bookings growth of 47% over fourth quarter 2004.
- Signing of 129 contracts with new customers for various modules of the WebSideStory Active Marketing Suite, up from 110 in the previous quarter.
- Average contract size for new customers of approximately $30,000 in 1-year value.
- Average relationship value for all customers of approximately $40,000 per year in 1-year value.
- Continued success in cross-selling Atomz' solutions, signing 7 contracts worth over $500,000 in aggregate for the Search and Publish applications with current HBX customers.

"We are pleased to announce another strong quarter with record financial results," said Jeff Lunsford, chairman and CEO. "In the quarter, we saw continued traction for the WebSideStory Active Marketing Suite, with a record of 129 new customers endorsing our strategy by signing up to use one or more modules of the suite.

This impressive list of operating highlights demonstrates that the WebSideStory team is executing well by listening to our customers and capitalizing on the great growth opportunities afforded us by the growth in online ad spending, e-commerce and on-demand software.

WebSideStory is strategically well-positioned at the intersection of these three trends. We believe these are sustainable, long-term trends that will help fuel the expansion of our business and suite of solutions in 2006. We were also pleased to see the cash generation of $3.5 million in the quarter, demonstrating the beneficial cash-led nature of our recurring revenue business model."

Merger with Visual Sciences, LLC
The company also announced today a merger with privately held Visual Sciences, LLC, an innovative provider of streaming data analysis and visualization software and on-demand services with 40 employees and over 40 customers utilizing its highly scalable analytical engine. "Visual Sciences is not a household name, but everyone in the web analytics business knows who they are. They have vaulted onto the scene and won the respect of everyone in our industry with the dynamic segmentation, multi-channel and real-time data visualization capabilities of their flagship web analytics solution, Visual Site. This transaction expands our addressable market by an estimated $1 billion and creates significant cross-sell opportunities within our over 1,100 enterprise customers. We are proud that this highly talented team has chosen WebSideStory to partner with as they continue to grow their business," said Jeff Lunsford. "In addition to Visual Site, we are excited about the large opportunity we see with Visual Sciences' other innovative products, Visual Call, Visual Mail and Visual Document. These powerful analytical solutions, combined with Visual Sciences' established relationships within the government sector, position WebSideStory well to benefit from our nation's Homeland Defense initiative."

"WebSideStory has the best sales, marketing and operational capabilities in digital marketing," commented Jim MacIntyre, co-founder and CEO of Visual Sciences. "Their and our disciplined, profitable business models and commitment to customer service will make a strong combination. We have admired the breadth, thorough reporting capabilities and ease-of-use of their award-winning HBX solution and we believe the strategy behind the WebSideStory Active Marketing Suite - that of delivering an integrated set of solutions to improve the efficiency of online businesses - is the right one. We look forward to integrating our technology with all of the modules of the WebSideStory Active Marketing Suite - HBX, Search and Publish - and creating solutions that no other company in digital marketing can match."

The total value of the consideration payable to the former holders of interests in Visual Sciences based on yesterday's closing price is $57.3 million and is comprised as follows: $22.0 million in cash; unsecured senior notes in the principal amount of $20.0 million; 568,512 shares of common stock to be held in escrow until March 31, 2007; and 189,511 shares of restricted common stock. In addition, in connection with the merger WebSideStory issued the former holders of interests in Visual Sciences warrants to purchase 1,082,923 shares of common stock with an exercise price of $18.4685 per share, exercisable for the next 18-months, and options to purchase 350,000 shares of common stock to the former employees of Visual Sciences.

The transaction closed today. Visual Sciences will operate as a wholly owned subsidiary of WebSideStory, Inc. Co-founders Jim MacIntyre and David Scherer will serve as CEO and CTO of the business unit, respectively.

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Published on: 12:00AM on 2nd February 2006