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WebMD Announces Fourth Quarter Financial Results

Revenue Increases 22%, Adjusted EBITDA Increases 48% Income from Continuing Operations Increases to $0.75 per Share, Including Tax Benefit of $0.41 per Share, From $0.10 per Share Last Year HLTH and WebMD Announce Agreement to Merge

NEW YORK, Feb 21, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- WebMD Health Corp. (Nasdaq: WBMD) today announced financial results for the three months ended December 31, 2007.

"WebMD's fourth quarter operating results demonstrate the strong progress that we continue to make towards delivering on the Company's overall strategic plan and I am confident in our growth outlook for the future," said Wayne Gattinella, President and CEO. "We continue to build our leadership position as the most recognized and trusted brand of health information."

Financial Summary

Revenue for the fourth quarter was $96.6 million compared to $79.4 million in the prior year period, an increase of 22%. Earnings before interest, taxes, depreciation, amortization, and other non-cash items ("Adjusted EBITDA") for the fourth quarter increased 48% to $33.1 million or $0.55 per share compared to $22.4 million or $0.38 per share in the prior year period. Income from continuing operations was $45.1 million or $0.75 per share for the fourth quarter compared to $6.0 million or $0.10 per share in the prior year period. Net income for the December 2007 quarter was $48.3 million or $0.81 per share compared to $6.0 million or $0.10 per share in the prior year period. Income from continuing operations and net income for the fourth quarter 2007 include a benefit of $24.7 million, or $0.41 per share, relating to certain reversals of WebMD's valuation allowance against deferred tax assets, primarily net operating loss ("NOL") carryforwards.

Revenue for the year ended December 31, 2007 was $332.0 million compared to $248.8 million a year ago, an increase of 33%. Adjusted EBITDA for the year was $84.7 million or $1.42 per share compared to $52.7 million or $0.91 per share a year ago, an increase of 61%. Income from continuing operations for the year was $62.4 million or $1.05 per share compared to $2.2 million or $0.04 per share a year ago. Net income for the year was $65.9 million or $1.10 per share compared to $2.5 million or $0.04 per share in the prior year. Income from continuing operations and net income for the year ended December 31, 2007 include a benefit of $24.7 million, or $0.41 per share, relating to certain reversals of WebMD's valuation allowance against deferred tax assets, primarily NOL carryforwards.

WebMD's revenue for the fourth quarter and full year excludes approximately $1 million and $4 million, respectively, related to its offline professional medical reference and textbook publication business which was sold on December 31, 2007 and is now reflected as a discontinued operation in WebMD's financial statements for current and prior periods.

Operating Highlights

Online Services segment revenue was $92.3 million for the fourth quarter compared to $76.1 million in the prior year period, an increase of 21%. Advertising and sponsorship revenue increased 21% to $70.4 million. Private portal licensing revenue increased 25% to $21.6 million. Online Services segment Adjusted EBITDA increased 39% to $31.6 million compared to $22.7 million in the prior year period.

The WebMD Health Network continued to expand with the average number of unique users reaching 44.8 million per month and total traffic of 968 million page views during the fourth quarter, increases of 26% and 19%, respectively, from a year ago. Excluding the prior year period's traffic from AOL (which ceased to be part of The WebMD Health Network earlier this year), the average monthly unique users of The WebMD Health Network increased 32% and page view traffic increased 22%. In the fourth quarter, 936,000 continuing medical education (CME) programs were completed on the Network, an increase of 50% from the prior year period.

WebMD continued to expand its base of large employers and health plans utilizing its private Health and Benefits portals during the fourth quarter, bringing total platform customers to 117 from 99 a year ago. The installed base of companies licensing the WebMD private portal platform now includes: Blue Cross and Blue Shield of Minnesota, Special Agents Mutual Benefit Association, ConnectiCare, Inc., Blue Shield of California and Liebert Corporation.

Publishing and Other Services segment revenue was $4.3 million for the fourth quarter compared to $3.3 million in the prior year period, an increase of 33%. Publishing and Other Services segment Adjusted EBITDA was $1.5 million compared to a loss of ($321,000) in the prior year period. As noted above, effective December 31, 2007, WebMD sold its offline professional medical reference and textbook publication business. This business is now reflected as a discontinued operation in the Company's financial statements for current and prior periods.

HLTH and WebMD Announce Agreement to Merge

In a separate release today, HLTH and WebMD announced that they have entered into a definitive merger agreement pursuant to which HLTH will merge into WebMD. The merger will eliminate HLTH's controlling interest in WebMD and reduce the number of outstanding shares by approximately 20% and is expected to leave WebMD with approximately $700 million in cash and investments and the flexibility to pursue future opportunities as they may arise.

Investment in Auction Rate Securities Backed by Federally Guaranteed Student Loans

WebMD currently has a total of approximately $327 million in consolidated cash, cash equivalents and marketable securities, which includes approximately $169 million of investments in certain auction rate securities (ARS). The types of ARS investments that WebMD owns are backed by student loans, 97% of which are guaranteed under the Federal Family Education Loan Program (FFELP), and all had credit ratings of AAA or Aaa when purchased. WebMD does not own any other type of ARS investments.

The interest rates on these ARS are reset every 28 days by an auction process. Historically, these types of ARS investments have been highly liquid. Last week, auctions for ARS investments backed by student loans failed, including auctions for ARS investments held by WebMD. The result of a failed auction is that these ARS continue to pay interest in accordance with their terms until the next successful auction; however, liquidity will be limited until there is a successful auction or until such time as other markets for these ARS investments develop. WebMD believes that the underlying credit quality of the assets backing its ARS investments have not been impacted by the reduced liquidity of these ARS investments. As a result of these recent events, WebMD is in the process of evaluating the extent of any impairment in its ARS investments resulting from the current lack of liquidity; however, WebMD is not yet able to quantify the amount of any such impairment. WebMD believes that any lack of liquidity relating to its ARS investments will not have an impact on its ability to fund its operations.

Financial Guidance

WebMD provided updated financial guidance on February 11, 2008. A schedule detailing this guidance is attached to the press release and Form 8-K issued on that date. This guidance did not contemplate the merger announced today.

Analyst and Investor Conference Call

As previously announced, WebMD will hold a conference call with investors and analysts to discuss its fourth quarter and year end results at 4:45 pm (eastern) today. The call can be accessed at www.wbmd.com (in the Investor Relations section). A replay of the audio webcast will be available at the same web address.

About WebMD

WebMD Health Corp. (Nasdaq: WBMD) is the leading provider of health information services, serving consumers, physicians, healthcare professionals, employers and health plans through our public and private online portals and health-focused publications. WebMD Health Corp. is a subsidiary of HLTH Corporation (Nasdaq: HLTH).

The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, eMedicine, eMedicine Health, RxList and theHeart.org.

All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: expectations regarding the credit ratings and valuation of and market for HLTH's and WebMD's investments in auction rate securities (ARS); HLTH's and WebMD's future financial results and other measures of WebMD's future performance; market opportunities and WebMD's ability to capitalize on them; the benefits expected from new products or services and from other potential sources of additional revenue; the merger transaction between HLTH and WebMD (the "Merger Transaction"); and the potential sales transactions with respect to ViPS and Porex (the "Potential Sales Transactions"). These statements speak only as of the date of this press release, are based on HLTH's and WebMD's current plans and expectations, and involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to: changes in the markets for ARS; market acceptance of HLTH's and WebMD's products and services; HLTH's and WebMD's relationships with customers and strategic partners; and changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet and information technology industries. Further information about these matters can be found in our other Securities and Exchange Commission filings. In addition, there can be no assurances regarding: whether HLTH and WebMD will be able to complete the Merger Transaction or as to the timing of such transaction; or whether HLTH will be able to complete the Potential Sales Transactions or as to the timing or terms of such transactions. Except as required by applicable law or regulation, we do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances.

This press release, and the accompanying tables, include both financial measures in accordance with accounting principles generally accepted in the United States of America, or GAAP, as well as certain non-GAAP financial measures. The tables attached to this press release include reconciliations of these non-GAAP financial measures to GAAP financial measures. In addition, an "Explanation of Non-GAAP Financial Measures" is attached to this press release as Annex A.

WebMD(R), WebMD Health(R), Medscape(R), eMedicine(R), MedicineNet(R), RxList(R), Subimo(R), Medsite(R), The Little Blue Book(R) and Summex(R), are trademarks of WebMD Health Corp. or its subsidiaries.



                              WEBMD HEALTH CORP.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per share data, unaudited)


                                        Three Months Ended     Year Ended
                                           December 31,       December 31,
                                          2007     2006      2007      2006

    Revenue                              $96,642  $79,385  $331,954  $248,776

    Costs and expenses:
         Cost of operations               29,645   27,739   117,281   101,675
         Sales and marketing              26,387   23,248    93,645    76,189
         General and administrative       14,112   14,407    60,986    52,338
         Depreciation and amortization     7,216    5,018    27,233    17,639
         Interest income                   3,856      962    12,378     5,099
    Income from continuing operations
     before income tax (benefit)
     provision                            23,138    9,935    45,187     6,034
         Income tax (benefit) provision  (21,926)   3,886   (17,255)    3,883
    Income from continuing operations     45,064    6,049    62,442     2,151
         Income (loss) from discontinued
          operations, net of tax           3,232      (91)    3,442       385
    Net income                           $48,296   $5,958   $65,884    $2,536

    Basic income (loss) per common share:
         Income from continuing
          operations                       $0.78    $0.11     $1.09     $0.04
         Income (loss) from discontinued
          operations                        0.06    (0.00)     0.06      0.01
    Net Income                             $0.84    $0.11     $1.15     $0.05


    Diluted income (loss) per common share:
         Income from continuing
          operations                       $0.75    $0.10     $1.05     $0.04
         Income (loss) from discontinued
          operations                        0.06    (0.00)     0.05      0.00
    Net Income                             $0.81    $0.10     $1.10     $0.04

    Weighted-average shares outstanding
     used in computing basic and diluted
     net income (loss) per common share:
          Basic                           57,534   56,411    57,184    56,145
          Diluted                         59,748   58,367    59,743    58,075



                              WEBMD HEALTH CORP.
                       CONSOLIDATED SEGMENT INFORMATION
               (In thousands, except per share data, unaudited)


                                       Three Months Ended     Year Ended
                                          December 31,       December 31,
                                         2007     2006      2007      2006
    Revenue
     Online Services:
       Advertising and sponsorship      $70,389  $58,113  $229,333  $170,626
       Licensing                         21,556   17,306    81,471    55,621
       Content syndication and other        351      703     2,378     3,518
      Total Online Services              92,296   76,122   313,182   229,765
     Publishing and Other Services        4,346    3,263    18,772    19,011
                                        $96,642  $79,385  $331,954  $248,776
    Earnings (loss) before interest,
      taxes, depreciation, amortization
      and other non-cash items
      ("Adjusted EBITDA") (a)
     Online Services                    $31,612  $22,730   $80,594   $52,324
     Publishing and Other Services        1,460     (321)    4,103       362
                                         33,072   22,409    84,697    52,686

       Adjusted EBITDA per basic common
        share                             $0.57    $0.40     $1.48     $0.94
       Adjusted EBITDA per diluted
        common share                      $0.55    $0.38     $1.42     $0.91

    Interest, taxes, depreciation,
     amortization and other non-cash
     items (b)
      Interest income                     3,856      962    12,378     5,099
      Depreciation and amortization      (7,216)  (5,018)  (27,233)  (17,639)
      Non-cash advertising               (2,775)  (2,961)   (5,264)   (7,415)
      Non-cash stock-based compensation  (3,799)  (5,457)  (19,391)  (26,697)
      Income tax benefit (provision)     21,926   (3,886)   17,255    (3,883)
    Income from continuing operations    45,064    6,049    62,442     2,151
      Income (loss) from discontinued
       operations, net of tax             3,232      (91)    3,442       385
    Net income                          $48,296   $5,958   $65,884    $2,536

    Basic income (loss) per common share:
      Income from continuing operations   $0.78    $0.11     $1.09     $0.04
      Income (loss) from discontinued
       operations                          0.06    (0.00)     0.06      0.01
    Net Income                            $0.84    $0.11     $1.15     $0.05

    Diluted income (loss) per common share:
      Income from continuing operations   $0.75    $0.10     $1.05     $0.04
      Income (loss) from discontinued
       operations                          0.06    (0.00)     0.05      0.00
    Net Income                            $0.81    $0.10     $1.10     $0.04

    Weighted-average shares outstanding
     used in computing basic and diluted
     net income (loss) per common share:
      Basic                              57,534   56,411    57,184    56,145
      Diluted                            59,748   58,367    59,743    58,075


       (a) See Annex A - Explanation of Non-GAAP Financial Measures

       (b) Reconciliation of Adjusted EBITDA to net income




                              WEBMD HEALTH CORP.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                          (In thousands, unaudited)

                                               December 31,       December 31,
                                                   2007               2006
    ASSETS
    Current assets:
     Cash and cash equivalents                   $213,753            $44,660
     Short-term investments                        80,900              9,490
     Accounts receivable, net                      86,081             89,652
     Current portion of prepaid advertising         2,329              2,656
     Due from HLTH                                  1,153            143,153
     Other current assets                          10,840              5,312
     Assets of discontinued operations                -                   48
      Total current assets                        395,056            294,971

    Property and equipment, net                    48,589             44,709
    Prepaid advertising                             4,521              9,459
    Goodwill                                      221,429            225,028
    Intangible assets, net                         36,314             45,268
    Other assets                                   12,955                530
                                                 $718,864           $619,965

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
     Accrued expenses                             $26,498            $32,846
     Deferred revenue                              76,401             76,086
     Liabilities of discontinued operations           -                1,645
      Total current liabilities                   102,899            110,577

    Deferred tax liability                            -                5,367
    Other long-term liabilities                     9,210              7,912

    Stockholders' equity                          606,755            496,109
                                                 $718,864           $619,965



                              WEBMD HEALTH CORP.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (In thousands, unaudited)


                                                            Year Ended
                                                           December 31,
                                                     2007               2006
    Cash flows from operating activities:
     Net income                                    $65,884             $2,536
     Adjustments to reconcile net
      income to net cash provided by
      operating activities:
       Income from discontinued operations,
        net of tax                                  (3,442)              (385)
       Depreciation and amortization                27,233             17,639
       Non-cash advertising                          5,264              7,415
       Non-cash stock-based compensation            19,391             26,697
       Deferred income taxes                       (20,953)             2,104
       Changes in operating assets and liabilities:
         Accounts receivable                         3,570            (25,430)
         Other assets                                1,102               (971)
         Accrued expenses and other long-term
          liabilities                               (7,185)             6,698
         Due to HLTH                                (3,278)            (1,568)
         Deferred revenue                              314             17,761
           Net cash provided by continuing
            operations                              87,900             52,496
           Net cash (used in) provided by
            discontinued operations                   (390)               305
           Net cash provided by operating
            activities                              87,510             52,801

    Cash flows from investing activities:
     Proceeds from maturities and sales
      of available-for-sale securities             212,923            304,184
     Purchases of available-for-sale
      securities                                  (284,333)          (229,410)
     Purchases of property and equipment           (18,058)           (28,452)
     Cash paid in business combinations,
      net of cash acquired                             -             (130,167)
           Net cash used in investing activities   (89,468)           (83,845)

    Cash flows from financing activities:
     Proceeds from issuance of common stock         14,355              5,257
     Tax benefit on stock-based awards               1,577                -
     Net cash transfers with HLTH                  155,119             (5,257)
           Net cash provided by financing
            activities                             171,051                -

    Net increase (decrease) in cash and
     cash equivalents                              169,093            (31,044)

    Cash and cash equivalents at
     beginning of period                            44,660             75,704
    Cash and cash equivalents at end of period    $213,753            $44,660



                                   ANNEX A

                  Explanation of Non-GAAP Financial Measures
                      (All dollar amounts in thousands)

The accompanying WebMD Health Corp. press release and financial tables include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measures represent earnings before interest, taxes, depreciation, amortization and other non-cash items (which we refer to as "Adjusted EBITDA") and related per share amounts. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, "income from continuing operations" calculated in accordance with GAAP. The tables attached to the accompanying press release include reconciliations of non-GAAP financial measures to GAAP financial measures.

Adjusted EBITDA is used by WebMD's management as an additional measure of WebMD's overall performance and its reporting segments' performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluating potential acquisitions or divestitures. Period- to-period comparisons of Adjusted EBITDA help WebMD's management identify additional trends in WebMD's and its reporting segments' financial results that may not be shown solely by period-to-period comparisons of income from continuing operations. In addition, WebMD uses Adjusted EBITDA in the incentive compensation programs applicable to many of its employees in order to evaluate WebMD's performance. WebMD management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. In order to compensate for those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in income from continuing operations, as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliations of Adjusted EBITDA to net income that accompany our press releases containing non-GAAP financial measures, including the reconciliations contained in the tables attached to the accompanying press release.

WebMD believes that the presentation of Adjusted EBITDA is useful to investors in their analysis of WebMD's results for reasons similar to the reasons why WebMD's management finds it useful and because it helps facilitate investor understanding of decisions made by WebMD's management in light of the performance metrics used in making those decisions. In addition, as more fully described below, WebMD believes that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to income from continuing operations, helps investors make comparisons between WebMD and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. However, Adjusted EBITDA is intended to provide a supplemental way of comparing WebMD with other public companies and is not intended as a substitute for comparisons based on "income from continuing operations" or "net income" calculated in accordance with GAAP. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.

The following is an explanation of the items excluded by WebMD from Adjusted EBITDA but included in income from continuing operations:

    -- Depreciation and Amortization.  Depreciation and amortization expense
       is a non-cash expense relating to capital expenditures and intangible
       assets arising from acquisitions that are expensed on a straight-line
       basis over the estimated useful life of the related assets. WebMD
       excludes depreciation and amortization expense from Adjusted EBITDA
       because it believes (i) the amount of such expenses in any specific
       period may not directly correlate to the underlying performance of
       WebMD's business operations and (ii) such expenses can vary
       significantly between periods as a result of new acquisitions and full
       amortization of previously acquired tangible and intangible assets.
       Accordingly, WebMD believes this exclusion assists management and
       investors in making period-to-period comparisons of operating
       performance.  Investors should note that use of tangible and intangible
       assets contributed to revenue in the periods presented and will
       contribute to future revenue generation and should also note that such
       expenses will recur in future periods.

    -- Stock-Based Compensation Expense.  Stock-based compensation expense is
       a non-cash expense arising from the grant of stock-based awards to
       employees. WebMD believes that excluding the effect of stock-based
       compensation from Adjusted EBITDA assists management and investors in
       making period-to-period comparisons in its operating performance
       because it believes (i) the amount of such expenses in any specific
       period may not directly correlate to the underlying performance of
       WebMD's business operations and (ii) such expenses can vary
       significantly between periods as a result of the timing of grants of
       new stock-based awards, including grants in connection with
       acquisitions.  Additionally, WebMD believes that excluding stock-based
       compensation from Adjusted EBITDA assists management and investors in
       making meaningful comparisons between WebMD's operating performance and
       the operating performance of other companies that may use different
       forms of employee compensation or different valuation methodologies for
       their stock-based compensation.  Investors should note that stock-based
       compensation is a key incentive offered to employees whose efforts
       contributed to the operating results in the periods presented and are
       expected to contribute to operating results in future periods.
       Investors should also note that such expenses will recur in the future.
       Stock-based compensation expenses included in the Statement of
       Operations are summarized as follows:


                                   Three Months Ended           Year Ended
                                      December 31,             December 31,
                                     2007      2006         2007         2006

    Non-cash stock-based
     compensation included in:
      Cost of operations            $(904)  $(1,633)     $(5,063)     $(8,744)
      Sales and marketing         $(1,167)  $(1,260)     $(5,056)     $(5,870)
      General and administrative  $(1,728)  $(2,564)     $(9,272)   $ (12,083)


    -- Non-Cash Advertising Expense.  This expense relates to the usage of
       non-cash advertising obtained from News Corporation ("Newscorp") in
       exchange for equity securities issued by our parent, HLTH Corporation
       in 2000. The advertising is available only on various Newscorp
       properties, primarily its television network and cable channels without
       any cash cost to WebMD. The amount of advertising that can be used in
       any year is subject to annual contractual limitation and expires in
       2010. WebMD does not incur any other cash expenses related to airing of
       television advertising. WebMD excludes this expense from Adjusted
       EBITDA (i) because it is a non-cash expense, (ii) because it is
       incremental to other non-television cash advertising expense that WebMD
       otherwise incurs, (iii) because WebMD has not and believes it will not
       incur cash expenses relating to television advertising in the future
       and (iv) to assist management and investors in comparing its operating
       results over multiple periods.  Investors should note that it is likely
       that WebMD derives some benefit from such advertising and that such
       expenses will recur in the future.  Non-cash advertising expenses
       included in the Consolidated Statement of Operations in Sales and
       Marketing expense were $2,775 and $2,961 for the three months ended
       December 31, 2007 and 2006, respectively, and $5,264 and $7,415 for the
       years ended December 31, 2007 and 2006, respectively.

    -- Interest Income.  Interest income is associated with the level of
       marketable debt securities and other interest bearing accounts in which
       WebMD invests.  Interest income varies over time due to varying levels
       of securities available for investment.  Transactions that WebMD has
       entered into in recent periods that have impacted securities available
       for investment include the initial public offering of equity in WebMD
       and acquisitions of other companies for varying amounts of cash since
       our initial public offering.  Additional financing transactions as well
       as potential acquisitions that WebMD may enter into in the future could
       impact the levels and timing of securities available for investment.
       WebMD excludes interest income from Adjusted EBITDA (i) because it is
       not directly attributable to the performance of WebMD's business
       operations and, accordingly, its exclusion assists management and
       investors in making period-to-period comparisons of operating
       performance and (ii) to assist management and investors in making
       comparisons to companies with different capital structures. Investors
       should note that interest income will recur in future periods.

    -- Income Tax Provision.  WebMD had a net operating loss (NOL)
       carryforward of approximately $270,000 as of the year ended December
       31, 2007.  WebMD has maintained a full valuation allowance on these NOL
       carryforwards until the fourth quarter of 2007 at which time a portion
       of the valuation allowance was reversed due to an increased history of
       generating income.  As WebMD reduces these NOL carryforwards, the
       related valuation allowances are reversed through the income statement.
       The timing of such reversals has not been consistent and as a result,
       WebMD's income tax expense can fluctuate significantly from period to
       period in a manner not directly related to WebMD's operating
       performance.  WebMD excludes the income tax provision from Adjusted
       EBITDA (i) because it believes that the income tax provision is not
       directly attributable to the underlying performance of WebMD's business
       operations and, accordingly, its exclusion assists management and
       investors in making period-to-period comparisons of operating
       performance and (ii) to assist management and investors in making
       comparisons to companies with different tax attributes.  Investors
       should note that income tax provision will recur in future periods.

SOURCE WebMD

http://www.webmd.com

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