WebSideStory Reports Fourth Profitable Quarter

Hosted Web analytics provider WebSideStory reported its fourth consecutive quarter of profitability in its first quarter as a public company.

The company brought in revenue of $5.7 million for the quarter, up from $4.1 million for the same period of 2003. Net income of $614,000 for the third quarter of 2004 compared to a loss of $561,000 for the same period of 2003. Total revenues increased 41 percent year-to-year, and subscription revenues rose 46 percent over the same period last year.

“The third quarter was our fourth consecutive quarter of profitability, resulting from strong recurring revenue growth in our core subscription business, and prudent management of our expenses,” said CFO Tom Willardson.

The company signed 70 new enterprise customers during the quarter, bringing the total number above 600. Willardson said that one-third of revenue growth came from existing customers, while the rest came from new customers.

At the same time revenue increased, costs as a percentage of revenues decreased — a classic benefit of the ASP model, which is designed to support multiple customers on the same infrastructure. This combination yielded an operating margin of 14.2 percent — an improvement of over 10.5 points since the beginning of the year.

“We built our business model to scale profitably, and we expect to continue to make strides in improving our operating margins as we grow our recurring revenue base faster than our operating expenses,” Willardson said.

According to Jeff Lunsford, WebSideStory’s chairman and CEO, growth came as a result of growing acceptance of its ASP-based business model. “We believe that on-demand solutions have shifted from being accepted 2 years ago, to being preferred today,” he said.

Another trend Lunsford noted was marketers’ increasing desire for integrated cross-channel analytics, which WebSideStory addressed last week with the release of its HBX Stream platform, which lets other developers of digital marketing tools, such as email service providers or content management companies, integrate more closely with WebSideStory’s HBX Web analytics.

WebSideStory originally filed for an IPO in April 2000, but withdrew that registration six months later, citing unfavorable market conditions. It filed again in May 2004, hoping to raise $57.5 million, which it later revised down to $45.5 million before it finally began trading in September 2004. The company closed its first day of trading at $9.25, and has ranged from $9.00 to $11.30 since then, closing today at $9.80 before the earnings news was released.

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