IRVINE, Calif. -- VitalStream Holdings, Inc. (OTCBB:VSTH), the world leader in audio and video streaming, today reported results for the fourth quarter and year ended December 31, 2005.

Revenues for the quarter ended December 31, 2005 were $4.7 million, an increase of approximately 56 percent over revenues of $3.0 million in the fourth quarter of 2004. Net loss for the fourth quarter of 2005 was ($2,295,000), or ($0.03) per share, versus a net loss of ($462,000), or ($0.01) per share, in the same period last year. Adjusted EBITDA for the quarter ended December 31, 2005 was ($1,335,000), compared to ($17,000) during the comparable period last year. (See "Use of Non-GAAP Financial Measures" below for definition of Adjusted EBITDA)

"VitalStream's strong growth in 2005 outpaced the industry, culminating in record revenues in the fourth quarter as traffic increased noticeably in mid-December when our upgraded content delivery network went on-line," stated Jack Waterman, chairman and chief executive officer of VitalStream. "While we experienced lower margins in the fourth quarter, we have taken the necessary steps that will result in a return to historical levels by the second quarter of 2006, with continued margin expansion through the remainder of the year. With our recent $14 million equity financing, newly strengthened Board and announced intent to move to Nasdaq through our planned reverse stock split, we enter 2006 as a significantly stronger company that is poised to capitalize on the skyrocketing demand for streaming media by content owners, advertisers and enterprises of all sizes."

Vitalstream's customer base includes many of the largest and fastest growing streamers of audio and video content including Disney and Intermix (Myspace.com). New customers added during the fourth quarter of 2005 include WalMart, Johnson & Johnson, Viacom's SpikeTV, ING, Time, Inc. and Deloitte Worldwide.

Revenues for the year ended December 31, 2005 were $15.9 million, an increase of approximately 59% from revenues of $10.0 million in fiscal year 2004. Net loss for fiscal year 2005 was ($4,018,000), or ($0.06) per share, compared to a net loss of ($1,546,000), or ($0.03) in fiscal 2004. Adjusted EBITDA for the year ended December 31, 2005 was ($1,531,000), compared to approximately $366,000 for the year ended December 31, 2004.

Financial Outlook

"Looking ahead, we believe that 2006 will be a year of unprecedented growth for online audio and video streaming. We expect that VitalStream will outperform industry growth rates in 2006 and will achieve positive Adjusted EBITDA from continuing operations in 2006 absent any potential merger or strategic investment opportunities and excluding the impact of stock option expensing. Specifically, our outlook calls for an increase in annual revenues to the range of $22 million to $24 million and Adjusted EBITDA of $2.75 million to $4 million," concluded Mr. Waterman.

VitalStream Holdings Inc. (OTCBB:VSTH)