MIVA announces fourth quarter and full year 2005 results

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MIVA announces fourth quarter and full year 2005 results

FORT MYERS, Fla. - March 13, 2006 - MIVA, Inc. (NASDAQ: MIVA), today reported financial results for the fourth quarter and full year ended December 31, 2005.

Fourth Quarter 2005 Financial Highlights:

Revenue of $43.0 million;
GAAP net loss of $(0.15) per diluted share or $4.7 million;
Adjusted EBITDA⁽¹⁾ of $1.2 million, excluding European business tax issues; and
Adjusted net loss⁽¹⁾ of $(0.02) per diluted share, excluding European business tax issues and tax expense related to adjustments of net operating losses carried over from entities acquired in 2004.

Full Year 2005 Financial Highlights:

Revenue of $194.6 million;
GAAP net loss of $(4.23) per diluted share or $130.2 million;
Adjusted EBITDA of $15.5 million, excluding the non-cash impairment charge, the patent litigation settlement charge and European business tax issues;
Adjusted net income of $0.14 per diluted share, excluding the non-cash impairment charge, the patent litigation settlement charge, European business tax issues and tax expense related to adjustments of net operating losses carried over from entities acquired in 2004; and
Cash, cash equivalents and short-term investments at December 31, 2005 of approximately $38.4 million, compared to $54.2 million at December 31, 2004. The change in MIVA’s cash balances during 2005 includes the impact of payments of $12.1 million for the patent settlement with Yahoo! and associated legal costs, and earnout payments of $7.2 million related to companies acquired in 2004.

“We are pleased by the team’s successful execution on a number of strategic and operational initiatives during the year, especially given the significant steps we took which we believe will help reestablish MIVA as an industry leader,” said Craig Pisaris-Henderson, chairman and chief executive officer of MIVA. “We worked to improve the quality of our distribution network; we also identified the need and opportunity to invest in new growth initiatives and extend our product roadmap, introducing in 2005 more products, tools and functionality than at any time in our history. Simultaneously, we managed our cost structure and we believe we are now in a healthier position to leverage the assets that hold the most potential to create greater value. To that end, we are issuing Q1 2006 revenue guidance that anticipates growth over our Q4 2005 reported revenue.”

Fourth Quarter Results

Revenue was $43.0 million in Q4 2005, a decrease of 27% versus Q4 2004 revenue of $58.7 million. GAAP net loss was $4.7 million, or $(0.15) per diluted share in Q4 2005.

Adjusted EBITDA was $1.2 million in Q4 2005, excluding European business tax issues. This compares to Adjusted EBITDA of $11.5 million, excluding a non-cash impairment charge, for the same period in 2004.

Adjusted net loss was $(0.02) per diluted share in Q4 2005, excluding European business tax issues and tax expense related to adjustments of net operating losses carried over from entities acquired in 2004, compared to Adjusted net income, excluding a non-cash impairment charge and a permanent tax benefit, of $0.20 per diluted share for the same period in 2004.

Operating expenses, excluding the non-cash stock compensation charge, were $24.6 million in Q4 2005, compared to $19.7 million, excluding a non-cash impairment charge, for the same period in 2004.

Amortization expense in Q4 2005 was $2.0 million, compared to $2.2 million for the same period in 2004. Amortization expense in Q4 2005 included $1.4 million for acquired intangible assets and $0.6 million for capitalized and purchased software.

As part of its cost-realignment initiative, the Company’s employee count was reduced throughout Q4 2005 and into 2006. As of December 31, 2005, the Company had an active base of 483 full time employees, down from 515 at September 30, 2005. As of January 31, 2006, MIVA has an active base of 477.

Full Year 2005 Results

The Company’s FY 2005 revenue and ongoing operating expenses increased substantially versus FY 2004, primarily due to the inclusion of operating results from the merger with MIVA Media Europe, completed in July 2004, the acquisition of B&B, completed in June 2004, and the acquisition of MIVA Direct, completed in March 2004. The year-over-year increase was in part offset by actions taken in late 2004 and over 2005 to increase the overall quality of MIVA Media traffic.

Revenue was $194.6 million in FY 2005, an increase of 15% versus FY 2004 revenue of $169.5 million. GAAP net loss was $130.2 million, or $(4.23) per diluted share, in FY 2005.

Adjusted EBITDA was $15.5 million in FY 2005, excluding the non-cash impairment charge, the patent litigation settlement charge and European business tax issues, compared to Adjusted EBITDA of $37.1 million, excluding a non-cash impairment charge, for FY 2004.

Adjusted net income was $0.14 per diluted share in FY 2005, excluding the non-cash impairment charge, the patent litigation settlement charge, European business tax issues and tax expense related to adjustments of net operating losses carried over from entities acquired in 2004, compared to Adjusted net income, excluding a non-cash impairment charge and a permanent tax benefit, of $0.74 per diluted share for FY 2004.

Operating expenses, excluding the non-cash impairment charge, the patent litigation settlement charge and the non-cash stock compensation charge, were $92.0 million in FY 2005, compared to $55.3 million, excluding a non-cash impairment charge, for FY 2004.

At December 31, 2005 the Company’s balance sheet reflected an income tax receivable in the amount of $7.1 million, compared to $1.6 million at December 31, 2004. The Company anticipates receiving approximately $5.9 million in Federal tax refunds during 2006 from operating losses generated in 2005 and carried back to prior years.

(1)

Business Outlook

Over 2006, the Company anticipates continuing investments into innovative products while exercising prudent financial discipline. The Company has an active global product development pipeline and plans to introduce additional publisher and advertiser solutions throughout 2006.

Beginning in 2006, the Company will expense the fair value of stock options in accordance with GAAP. The Company’s net income guidance includes the impact of stock compensation expense, which is estimated to be approximately $1.5 million in the first quarter of 2006. Consistent with the presentation of Q4 and FY 2005 results, the following 2006 Adjusted EBITDA and Adjusted EPS guidance excludes non-cash stock compensation expense.

Revenue
Q1 2006 estimated range: $43 to $45 million

GAAP EPS
Q1 2006 estimated range: $(0.10) to $(0.07) (31.2 million shares outstanding)

Adjusted EBITDA
Q1 2006 estimated range: $0.0 to $1.0 million

Adjusted EPS
Q1 2006 estimated range: $(0.04) to $(0.01) (31.2 million shares outstanding)

Operating Metrics

Beginning with Q2 2004, MIVA reports two operating metrics to provide better insight into the progress of its business: Paid Click-throughs and Active Relationships.

Quarter

Paid Click-throughs (in millions)

Active Relationships ⁺

Q2 2004

219

63,000

Q3 2004

224

70,000

Q4 2004

251

75,000

Q1 2005

259

85,000

Q2 2005

217

87,000

Q3 2005

206

90,000

Q4 2005

219

90,000

Note: The amounts above for Q2 2004 are presented on a pro forma basis to include metrics from MIVA Small Business, MIVA Direct, B&B and MIVA Media Europe as if all companies were wholly-owned on April 1, 2004. The metrics for these acquired/merged companies for the pre-closing periods are based on information obtained from their records during those periods.

⁺ MIVA defines active relationships for a fiscal quarter to be those that have had a paying transaction with the Company during the quarter, including the active advertiser accounts of MIVA’s private label partners. MIVA has relationships with over 100,000 online businesses, including businesses that are using its MIVA Merchant storefront software, or that have made deposits in their MIVA Media accounts to fund future transactions, but some have not purchased any products or services from the Company during the quarter and hence are not included in the active relationships metric.

Management Conference Call

Chairman and Chief Executive Officer Craig Pisaris-Henderson, Chief Operating Officer Peter Corrao and Chief Financial Officer William Seippel will participate in a conference call to discuss the full results and outlook for the Company on March 13, 2006, at approximately 5:00 p.m. ET. The conference call will be simulcast on the Internet at http://ir.miva.com/medialist.cfm.

A replay of the conference call will be available on the investor relations area of MIVA’s website at http://ir.miva.com/medialist.cfm. Interested parties may email questions in advance to Peter Weinberg of MIVA, Inc. at peter.weinberg@miva.com.

About MIVA®, Inc.

MIVA is a leading independent Performance Marketing Network dedicated to helping businesses grow. Our new media platform facilitates performance marketing for partners (publishers), advertisers and consumers (end-users). Our primary focus is on providing our partners with a complete set of innovative solutions enabling the acquisition, retention and monetization of their online audiences. For our advertisers, we provide solutions to manage, optimize and measure return on investment from keyword-targeted and context-related performance marketing programs. We generate traffic and leads to our advertisers through our network of publisher partners. Our integrated e-commerce merchant solutions allow online stores to capitalize on leads by offering robust online storefront, shopping cart, shipping, and payment capabilities.

Forward-looking Statements

This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as "plan," "intend," "believe" or "expect'" or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation, the potential that the information and estimates used to predict anticipated revenues and expenses were not accurate; the risks associated with the fact that we have material weaknesses in our internal control over financial reporting that may prevent us from being able to accurately report our financial results or prevent fraud; the risk that we have in the past and may in the future incur goodwill impairment charges that materially adversely affect our earnings and our operating results; the potential that demand for our services will decrease; the risk that we will not be able to continue to enter into new online marketing relationships to drive qualified traffic to our advertisers; the risk that our distribution partners will use unacceptable means to obtain users or that we will need to remove traffic generated by distribution partners; risks associated with our ability to compete with competitors and increased competition for distribution partners; political and global economic risks attendant to our business; risks associated with legal and cultural pressures on certain of our advertiser’s service and/or product offerings; other economic, business and competitive factors generally affecting our business; the risk that operation of our business model infringes upon intellectual property rights held by others; our reliance on distribution partners for revenue generating traffic; risks associated with our expanding international presence; difficulties executing integration strategies or achieving planned synergies with acquired businesses and private label initiatives; the risk that we will not be able to effectively manage our growth; the risk that new technologies could emerge which could limit the effectiveness of our products and services; risks associated with the operation of our technical systems, including system interruptions, security breaches and damage; risks associated with Internet security, including security breaches which, if they were to occur, could damage our reputation and expose us to loss or litigation; risks relating to regulatory and legal uncertainties, both domestically and internationally. Additional key risks are described in MIVA's reports filed with the U.S. Securities and Exchange Commission, including the Form 10-K/A for fiscal 2004, and the most recently filed quarterly report on Form 10-Q. MIVA undertakes no obligation to update the information contained herein.

Non-GAAP Financial Measures

This press release includes discussion of additional financial measures “Adjusted EBITDA” and “Adjusted Net Income.” These measures are defined as non-GAAP financial measures by the Securities and Exchange Commission and may differ from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. generally accepted accounting principles (GAAP). MIVA provides reconciliations of these two financial measures to net income and net income per share in its press releases regarding actual financial results. A reconciliation of these two financial measures to net income and net income per share for the three and twelve months ended December 31, 2005 included in this press release is set forth below.

®Registered trademark of MIVA, Inc.

Pay-Per-Call is a registered trademark of Ingenio, Inc.

All other marks properties of their respective companies.

                              MIVA, Inc.
                 Consolidated Statements of Operations
                 (in thousands, except per share data)


                             Three Months            Year Ended
                          Ended December 31,         December 31,
                           2005        2004        2005        2004
                        ----------  ----------  ----------  ----------
                       (unaudited) (unaudited) (unaudited)

Revenues               $   42,951  $   58,726  $  194,616  $  169,470
Cost of services           21,402      30,745     101,306      86,086
                        ----------  ----------  ----------  ----------

Gross profit               21,549      27,981      93,310      83,384

Operating expenses
  Marketing, sales, and
   service                 10,097       7,081      36,025      18,962
  General and
   administrative          10,301       8,677      38,483      25,145
  Product development       3,314       1,780      10,595       5,548
  Impairment loss on
   goodwill and other
   assets                       -       1,140     123,188       1,140
  Amortization              2,004       2,187       8,081       5,686
  Patent litigation
   settlement                   -           -       8,000           -
                        ----------  ----------  ----------  ----------

Total operating
 expenses                  25,716      20,865     224,372      56,481
                        ----------  ----------  ----------  ----------

Income (loss) from
 operations                (4,167)      7,116    (131,062)     26,903
Interest income, net           11         122         458         495
Exchange rate gain
 (loss)                        34         327        (119)        339
Other expense                   -           -           -         (19)
                        ----------  ----------  ----------  ----------

Income (loss) before
 provision for income
 taxes                     (4,122)      7,565    (130,723)     27,718

Income tax expense
 (benefit)                    540       2,817        (556)     10,690
                        ----------  ----------  ----------  ----------

Net income (loss)      $   (4,662) $    4,748  $ (130,167) $   17,028
                        ==========  ==========  ==========  ==========

Net income (loss) per
 share
  Basic                $    (0.15) $     0.16  $    (4.23) $     0.65
                        ==========  ==========  ==========  ==========
  Diluted              $    (0.15) $     0.15  $    (4.23) $     0.60
                        ==========  ==========  ==========  ==========

Weighted-average number
 of common shares
 outstanding
  Basic                    30,992      30,372      30,782      26,318
                        ==========  ==========  ==========  ==========
  Diluted                  30,992      32,611      30,782      28,518
                        ==========  ==========  ==========  ==========

                              MIVA, Inc.
       Reconciliations to Consolidated Statements of Operations
                 (in thousands, except per share data)


                             Three Months            Year Ended
Additional information:   Ended December 31,         December 31,
                           2005        2004        2005        2004
                        ----------  ----------  ----------  ----------
Adjusted EBITDA,
 excluding non-cash
 impairment charge,
 patent litigation
 settlement charge and
 European business
 tax issues            $    1,186  $   11,511  $   15,477  $   37,137
                        ==========  ==========  ==========  ==========
Adjusted net income
 (loss), excluding 
 non-cash impairment
 charge, patent
 litigation settlement
 charge, European
 business tax issues
 and tax adjustments   $     (774) $    6,674  $    4,641  $   21,123
                        ==========  ==========  ==========  ==========
Adjusted net income
 (loss), excluding 
 non-cash impairment
 charge, patent
 litigation settlement
 charge, European
 business tax issues
 and tax adjustments
 per diluted share     $    (0.02) $     0.20  $     0.14  $     0.74
                        ==========  ==========  ==========  ==========


Reconciliation of Net
 Income (Loss) to
 Adjusted EBITDA,
 Excluding Non-cash
 Impairment Charge,
 Patent Litigation
 Settlement Charge and       Three Months             Year Ended
 European Business Tax    Ended December 31,          December 31,
 Issues                    2005        2004        2005        2004
                        ----------  ----------  ----------  ----------
Net income (loss)      $   (4,662) $    4,748  $ (130,167) $   17,028
Interest income, net
 and exchange rate gain       (45)       (449)       (339)       (815)
Taxes                         540       2,817        (556)     10,690
Depreciation                1,381       1,068       5,302       3,408
Amortization                2,004       2,187       8,081       5,686
                        ----------  ----------  ----------  ----------

EBITDA                       (782)     10,371    (117,679)     35,997

Non-cash impairment
 charge                         -       1,140     123,188       1,140
Patent litigation
 settlement charge              -           -       8,000           -
European business tax
 issues                       819           -         819           -
Non-cash stock
 compensation charge        1,149           -       1,149           -
                        ----------  ----------  ----------  ----------
Adjusted EBITDA,
 excluding non-cash
 impairment charge,
 patent litigation
 settlement charge and
 European business tax
 issues                $    1,186  $   11,511  $   15,477  $   37,137
                        ==========  ==========  ==========  ==========


Reconciliation of Net   
 Income (Loss) to
 Adjusted Net Income
 (Loss), Excluding
 Non-cash Impairment
 Charge, Patent
 Litigation Settlement
 Charge, European             Three Months             Year Ended
 Business Tax Issues      Ended December 31,          December 31,
 and Tax Adjustments       2005        2004        2005        2004
                        ----------  ----------  ----------  ----------
Net income (loss)      $   (4,662) $    4,748  $ (130,167) $   17,028
Amortization                2,004       2,187       8,081       5,686
Non-cash impairment
 charge                         -       1,140     123,188       1,140
Patent litigation
 settlement charge              -           -       8,000           -
Non-cash stock
 compensation charge        1,149           -       1,149           -
European business tax
 issues                       819           -         819           -
Tax effect of above
 adjustments               (1,374)       (831)     (7,719)     (2,161)
Permanent tax benefit           -        (570)          -        (570)
Tax expense related to
 adjustment of net
 operating losses
 carried over from
 entities acquired in
 2004                       1,290           -       1,290           -
                        ----------  ----------  ----------  ----------
Adjusted net income
 (loss), excluding 
 non-cash impairment
 charge, patent

 litigation settlement
 charge, European
 business tax issues
 and tax adjustments   $     (774) $    6,674  $    4,641  $   21,123
                        ==========  ==========  ==========  ==========

Adjusted net income
 (loss), excluding
 non-cash impairment
 charge, patent
 litigation settlement
 charge, European
 business tax issues
 and tax adjustments per
 diluted share              (0.02)       0.20        0.14        0.74
Shares used in per
 share calculation -
 diluted                   30,992      32,611      32,585      28,518

                              MIVA, Inc.
                 Condensed Consolidated Balance Sheets
                   (in thousands, except par value)

                                             December 31, December 31,
                   ASSETS                        2005          2004
                                             ------------  -----------
                                             (unaudited)
CURRENT ASSETS
  Cash, cash equivalents & short-term
   investments                              $     38,436  $    54,224
  Accounts receivable, less allowance for
   doubtful accounts of $1,904 and $3,095 at
   December 31, 2005 and 2004, respectively       22,387       26,117
  Deferred tax assets                              1,140        2,510
  Income tax receivable                            7,105        1,626
  Prepaid expenses and other current assets        1,263        1,555
                                             ------------  -----------

    Total current assets                          70,331       86,032

PROPERTY AND EQUIPMENT - NET                      17,019       16,755
INTANGIBLE ASSETS - NET                           98,830      235,486
DEFERRED TAX ASSETS, NET OF VALUATION
 ALLOWANCE                                         3,553        1,964
OTHER ASSETS                                       1,059          967
                                             ------------  -----------

    Total assets                            $    190,792  $   341,204
                                             ============  ===========

    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued expenses     $     33,311  $    33,421
  Deferred revenue                                 3,469        5,798
  Current portion of long-term debt                1,240        3,941
  Other current liabilities                          831          760
                                             ------------  -----------

    Total current liabilities                     38,851       43,920

DEFERRED TAX LIABILITIES                           3,636        5,855
LONG-TERM DEBT AND OTHER LONG-TERM
 LIABILITIES                                       1,792        3,750
                                             ------------  -----------

    Total liabilities                             44,279       53,525
                                             ------------  -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stock, $.001 par value;
   authorized, 500 shares; none issued and
   outstanding                                         -            -
  Common stock, $.001 par value; authorized,
   200,000 shares; issued 31,099 and 30,502,
   respectively; outstanding 31,001 and
   30,459, respectively                               31           31
  Additional paid-in capital                     250,465      247,132
  Treasury stock; 98 and 43 shares at cost,
   respectively                                   (1,093)        (804)
  Accumulated other comprehensive income          (1,235)      12,808
  Retained earnings (deficit)                   (101,655)      28,512
                                             ------------  -----------

    Total stockholders' equity                   146,513      287,679
                                             ------------  -----------

    Total liabilities and stockholders'
     equity                                 $    190,792  $   341,204
                                             ============  ===========

U.S. MIVA Investor Relations Contact:
Peter Weinberg
(239) 561-7229
peter.weinberg@miva.com

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