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WebMD Announces Fourth Quarter Financial Results

WebMD Total Revenue Increased 22%; Advertising Revenue Increased 28%
WebMD Adjusted EBITDA Increased 49%

NEW YORK, Feb. 23, 2011 /PRNewswire/ -- WebMD Health Corp. (Nasdaq: WBMD), the leading source of health information, today announced financial results for its fourth quarter ended December 31, 2010.

"WebMD finished 2010 with another quarter of strong financial and operating performance," said Wayne Gattinella, President and CEO, WebMD. "We solidified our position as the most recognized and trusted brand of health and wellness information as more than 86 million visitors are engaging with our content each month on both our desktop and mobile platforms."

For the fourth quarter ended December 31, 2010:


Revenue Highlights

Revenue increased 22% to $168.5 million for the fourth quarter, compared to $138.1 million in the prior year period.

Public portal advertising and sponsorship revenue increased 28% to $147.0 million, compared to $114.9 million in the prior year period. Traffic to the WebMD Health Network continued to grow, reaching a record average of 86.4 million unique users per month and total traffic of 1.8 billion page views during the fourth quarter, increases of 38% and 22%, respectively, from a year ago.

Private portal services revenue decreased 8% to $21.4 million, compared to $23.2 million in the prior year period. The base of large employers and health plans using WebMD's private Health and Benefits portals during the fourth quarter was 124.

Balance Sheet Highlights

During the fourth quarter, WebMD completed the optional redemption of all of its outstanding 3 1/8% Convertible Notes. Substantially all of these notes converted into approximately 2.4 million shares of WebMD common stock and the remaining notes were redeemed.  WebMD recorded a non-cash pre-tax charge of approximately $6.4 million during the quarter ended December 31, 2010 related to the conversions and redemptions of these Notes.

As of December 31, 2010, WebMD had $401 million in cash and cash equivalents.

On January 11, 2011, WebMD completed the private placement of $400 million aggregate principal amount of 2.5% Convertible Notes due 2018. In connection with the private placement, WebMD repurchased 1.9 million shares of its common stock for $100 million. WebMD had $688 million in cash and cash equivalents after completing this transaction.

Financial Guidance  

The Company issued financial guidance for 2011 today.

"We enter 2011 strongly positioned to benefit as biopharma and consumer products companies continue to shift their marketing spend to online channels," said Gattinella.

For 2011, WebMD expects:


For the first quarter of 2011, WebMD expects:


WebMD is providing a schedule (attached to this press release) with additional detail.

Analyst and Investor Conference Call  

As previously announced, WebMD will hold a conference call with investors and analysts to discuss its fourth quarter results at 4:45 p.m. (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, mobile platforms and health-focused publications. More than 80 million unique visitors access the WebMD Health Network each month.

The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, emedicineHealth, RxList, theheart.org, drugs.com and Medscape Education.

All statements contained in this press release and the related analyst and investor conference call, other than statements of historical fact, are forward-looking statements, including those regarding:   guidance on our future financial results and other projections or measures of our future performance; market opportunities and our ability to capitalize on them; and the benefits expected from new or updated products or services and from other potential sources of additional revenue. These statements speak only as of the date of this press release, are based on our 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:  market acceptance of our products and services; our 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 Securities and Exchange Commission filings. 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®, Medscape®, eMedicine®, MedicineNet®, RxList®, Subimo®, Medsite®, Summex® and Medscape® Mobile 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


Years Ended




December 31,


December 31,




2010


2009


2010


2009











Revenue


$ 168,477


$ 138,073


$ 534,519


$ 438,536

Cost of operations


51,859


47,994


187,831


165,753

Sales and marketing


34,085


31,478


120,874


112,101

General and administrative


23,146


23,802


85,496


89,620

Depreciation and amortization


7,310


6,992


27,578


28,185

Interest income


99


3,089


3,949


9,149

Interest expense


1,347


5,657


11,453


23,515

(Loss) gain on convertible notes


(6,362)


-


(23,332)


10,120

Gain (loss) on investments


13,460


-


(9,517)


-

Severance and other transaction expenses


-


11,066


-


11,066

Other income (expense), net


20


(425)


(72)


(1,369)

Income from continuing operations before income










tax provision (benefit)


57,947


13,748


72,315


26,196


Income tax provision (benefit)


24,183


(50,413)


20,043


(45,491)

Consolidated income from continuing operations


33,764


64,161


52,272


71,687


Consolidated income from discontinued operations, net of tax


2,824


34,659


1,800


49,354

Consolidated net income inclusive of noncontrolling interest


36,588


98,820


54,072


121,041


Income attributable to noncontrolling interest


-


(524)


-


(3,705)

Net income attributable to Company stockholders


$   36,588


$   98,296


$   54,072


$ 117,336











Amounts attributable to Company stockholders:










Income from continuing operations


$   33,764


$   63,637


$   52,272


$   67,018


Income from discontinued operations


2,824


34,659


1,800


50,318

Net income attributable to Company stockholders


$   36,588


$   98,296


$   54,072


$ 117,336











Basic income per common share:










Income from continuing operations


$       0.58


$       1.19


$       0.93


$       1.40


Income from discontinued operations


0.05


0.65


0.04


1.05

Net income attributable to Company stockholders


$       0.63


$       1.84


$       0.97


$       2.45











Diluted income per common share:










Income from continuing operations


$       0.55


$       0.92


$       0.85


$       1.21


Income from discontinued operations


0.04


0.47


0.03


0.86

Net income attributable to Company stockholders


$       0.59


$       1.39


$       0.88


$       2.07











Weighted-average shares outstanding used in










computing  income per common share:









     Basic


57,505


52,688


55,328


47,400

     Diluted


62,330


71,945


62,228


57,740



WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands, unaudited)




















Three Months Ended


Years Ended




December 31,


December 31,




2010


2009


2010


2009

Revenue










Public portal advertising and sponsorship


$ 147,042


$ 114,875


$ 446,969


$ 347,570


Private portal services


21,435


23,198


87,550


90,966




$ 168,477


$ 138,073


$ 534,519


$ 438,536











Earnings before interest, taxes, non-cash










and other items ("Adjusted EBITDA") (a)


$   69,082


$   46,428


$ 173,618


$ 112,274











Interest, taxes, non-cash and other items  (b)










Interest income


99


3,089


3,949


9,149


Interest expense


(1,347)


(5,657)


(11,453)


(23,515)


Income tax (provision) benefit


(24,183)


50,413


(20,043)


45,491


Depreciation and amortization


(7,310)


(6,992)


(27,578)


(28,185)


Non-cash stock-based compensation


(9,695)


(11,629)


(33,300)


(39,412)


Non-cash advertising


-


-


-


(1,753)


(Loss) gain on convertible notes


(6,362)


-


(23,332)


10,120


Gain (loss) on investments


13,460


-


(9,517)


-


Severance and other transaction expenses


-


(11,066)


-


(11,066)


Other income (expense), net


20


(425)


(72)


(1,416)

Consolidated income from continuing operations


33,764


64,161


52,272


71,687


Consolidated income from discontinued operations, net of tax


2,824


34,659


1,800


49,354

Consolidated net income inclusive of noncontrolling interest


36,588


98,820


54,072


121,041


Income attributable to noncontrolling interest


-


(524)


-


(3,705)

Net income attributable to Company stockholders


$   36,588


$   98,296


$   54,072


$ 117,336











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

(b)  Reconciliation of Adjusted EBITDA to consolidated income from continuing operations.  



WEBMD HEALTH CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)













December 31, 2010


December 31, 2009

Assets





Cash and cash equivalents


$ 400,501


$    459,766

Accounts receivable, net


134,448


118,155

Prepaid expenses and other current assets


12,161


11,419

Investments


-


9,932

Deferred tax assets


23,467


-

       Total current assets


570,577


599,272






Investments


-


338,446

Property and equipment,  net


61,516


52,194

Goodwill


202,104


202,104

Intangible assets, net


22,626


26,020

Deferred tax assets


71,125


50,789

Other assets


14,254


19,723

Total Assets


$ 942,202


$ 1,288,548






Liabilities and Equity





Accrued expenses


$   53,181


$      63,721

Deferred revenue


97,043


98,474

1.75% convertible notes


-


264,583

Deferred tax liabilities


-


12,955

Liabilities of discontinued operations


17,327


34,197

     Total current liabilities


167,551


473,930






3 1/8% convertible notes, net of discount of $22,641 at December 31, 2009


-


227,659

Other long-term liabilities


21,756


22,191






Stockholders' equity


752,895


564,768






Total Liabilities and Equity


$ 942,202


$ 1,288,548



WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)























Years Ended







December 31,







2010


2009

Cash flows from operating activities:






Consolidated net income inclusive of noncontrolling interest


$   54,072


$ 121,041


Adjustments to reconcile consolidated net income inclusive of noncontrolling






 interest to net cash provided by operating activities:







Consolidated income from discontinued operations, net of tax


     (1,800)


   (49,354)



Depreciation and amortization


     27,578


     28,185



Non-cash interest, net


       5,594


     10,205



Non-cash advertising


             -  


       1,753



Non-cash stock-based compensation


     33,300


     39,412



Deferred income taxes


        (403)


   (42,143)



Loss (gain) on convertible notes


     23,332


   (10,120)



Loss on investments


       9,517


             -  



Changes in operating assets and liabilities:








Accounts receivable


   (16,292)


   (25,073)




Prepaid expenses and other, net


       4,617


       6,979




Accrued expenses and other long-term liabilities


          213


       7,677




Deferred revenue


     (1,431)


     18,861





Net cash provided by continuing operations


   138,297


   107,423





Net cash (used in) provided by discontinued operations


   (16,474)


          305





Net cash provided by operating activities


   121,823


   107,728










Cash flows from investing activities:






Proceeds from sales of available-for-sale securities


   361,852


       2,300


Proceeds received from ARS option


     10,467


             -  


Purchases of property and equipment


   (32,254)


   (17,886)


Proceeds (payments made) from the sale of discontinued operations


     (1,430)


     72,318





Net cash provided by continuing operations


   338,635


     56,732





Net cash used in discontinued operations


             -  


     (3,552)





Net cash provided by investing activities


   338,635


     53,180










Cash flows from financing activities:






Proceeds from exercise of stock options


     59,825


     42,898


Cash used for withholding taxes due on stock-based awards


   (86,533)


   (17,645)


Repurchases of convertible notes


   (94,525)


 (123,857)


Purchase of treasury stock under repurchase program and tender offers


 (420,948)


 (228,402)


Cash paid for merger related costs


             -  


     (5,021)


Excess tax benefit on stock-based awards


     22,458


          480





Net cash used in financing activities


 (519,723)


 (331,547)

Effect of exchange rates on cash


             -  


          557

Net decrease in cash and cash equivalents


   (59,265)


 (170,082)

Cash and cash equivalents at beginning of period


   459,766


   629,848

Cash and cash equivalents at end of period


$ 400,501


$ 459,766



WEBMD HEALTH CORP.

CONSOLIDATED NET INCOME ATTRIBUTABLE TO COMPANY STOCKHOLDERS

(In thousands, except per share data, unaudited)
























Three Months Ended


Years Ended




December 31,


December 31,




2010


2009


2010


2009











Numerator:









Income from continuing operations


$33,764


$63,637


$52,272


$67,018


Effect of participating non-vested restricted stock


(339)


(886)


(601)


(787)

Income from continuing operations -- Basic


33,425


62,751


51,671


66,231


Interest expense on 1.75% Convertible Notes, net of tax


-


876


1,469


3,714


Interest expense on 3 1/8% Convertible Notes, net of tax


809


2,472


-


-


Effect of dilutive securities of subsidiary


-


(57)


-


(343)

Income from continuing operations - Diluted


$34,234


$66,042


$53,140


$69,602











Income from discontinued operations net of tax


$  2,824


$34,659


$  1,800


$50,318


Effect of participating non-vested restricted stock


(28)


(483)


(21)


(591)

Income from discontinued operations --Basic


2,796


34,176


1,779


49,727


Effect of dilutive securities of subsidiary


-


-


-


53

Income from discontinued operations --Diluted


$  2,796


$34,176


$  1,779


$49,780











Denominator:









Weighted-average shares -- Basic


57,505


52,688


55,328


47,400


Employee stock options and restricted stock


2,651


4,470


3,706


2,265


1.75% Convertible Notes


-


7,640


3,194


8,075


3 1/8% Convertible Notes


2,174


7,147


-


-

Adjusted weighted-average shares after assumed conversions -- Diluted


62,330


71,945


62,228


57,740











Basic income per common share:










Income from continuing operations


$    0.58


$    1.19


$    0.93


$    1.40


Income from discontinued operations


0.05


0.65


0.04


1.05

Net income attributable to Company stockholders


$    0.63


$    1.84


$    0.97


$    2.45











Diluted income per common share:










Income from continuing operations


$    0.55


$    0.92


$    0.85


$    1.21


Income from discontinued operations


0.04


0.47


0.03


0.86

Net income attributable to Company stockholders


$    0.59


$    1.39


$    0.88


$    2.07



WebMD Health Corp.

2011 Financial Guidance

(in millions, except per share amounts)











Year Ending



December 31, 2011



Guidance Range






Revenue


$ 610.0


$ 640.0






Earnings before interest, taxes, depreciation, amortization





 and other non-cash items ("Adjusted EBITDA") (a)


$ 215.0


$ 230.0






Interest, taxes, depreciation, amortization and other





 non-cash items (b)





Interest income


       0.5


       0.5

Interest expense


   (11.5)


   (11.5)

Depreciation and amortization


   (30.0)


   (28.0)

Non-cash stock-based compensation


   (41.0)


   (38.0)

Pre-tax income from continuing operations


   133.0


   153.0






Income tax provision


   (56.0)


   (64.0)






Income from continuing operations


$   77.0


$   89.0











Income from continuing operations per share :





  Basic


$   1.27


$   1.47

  Diluted


$   1.22


$   1.40






Weighted-average shares outstanding used in computing income





    from continuing operations per common share:





 Basic


     60.0


     60.0

 Diluted


     68.0


     68.0








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


(b) Reconciliation of Adjusted EBITDA to consolidated income from continuing operations


Additional information regarding forecast for the first quarter of 2011:

  • Revenue is forecasted to be in excess of $125 million in the quarter ending March 31, 2011
  • Adjusted EBITDA as a percentage of revenue is forecasted to be approximately 27% in the quarter ending March 31, 2011
  • Income from continuing operations as a percentage of revenue is forecasted to be approximately 7% in the quarter ending March 31, 2011

Additional information regarding full year forecast:

  • Income tax rate for 2011 is forecasted to be approximately 42% of pretax income.  
  • The distribution of the annual revenue is expected to be approximately 85% public portals advertising and sponsorship and  15% private portal licensing.  Quarterly revenue distributions may vary from this annual estimate
  • 2011 guidance excludes any gains or losses related to investments / convertible notes.  

Additional information regarding full year income per share calculation:

  • Basic income per share: Reflects a reduction to income from continuing operations of $0.6 million to consider the effect of restricted stock.
  • Diluted income per share: Reflects an increase to income from continuing operations of $6.1 million for the interest expense (net of tax) on the 2.5% Notes of $6.7 million, offset by $0.6 million to consider the effect of restricted stock. The diluted share count of 68 million includes the weighted impact of 6 million shares related to the 2.5% Notes.


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, non-cash and other 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, "consolidated income (loss) from continuing operations" or "net income (loss) attributable to Company stockholders" calculated in accordance with GAAP.  The accompanying financial tables include reconciliations of non-GAAP financial measures to GAAP financial measures.  

Adjusted EBITDA is used by our management as an additional measure of our company's 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 our management identify additional trends in our company's financial results that may not be shown solely by period-to-period comparisons of consolidated income (loss) from continuing operations or net income (loss) attributable to Company stockholders.  In addition, we use Adjusted EBITDA in the incentive compensation programs applicable to many of our employees in order to evaluate our company's performance.  Our 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 consolidated income (loss) from continuing operations or net income (loss) attributable to Company stockholders, 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 consolidated income (loss) from continuing operations or to net income (loss) attributable to Company stockholders that accompany our press releases and disclosure documents containing non-GAAP financial measures, including the reconciliations contained in the accompanying financial tables.

We believe that the presentation of Adjusted EBITDA is useful to investors in their analysis of our results for reasons similar to the reasons why our management finds it useful and because it helps facilitate investor understanding of decisions made by management in light of the performance metrics used in making those decisions.  In addition, as more fully described below, we believe that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to consolidated income (loss) from continuing operations or to net income (loss) attributable to Company stockholders, helps investors make comparisons between our company 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 our company with other public companies and is not intended as a substitute for comparisons based on "consolidated income (loss) from continuing operations" or "net income (loss) attributable to Company stockholders" 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 us from Adjusted EBITDA but included in consolidated income (loss) from continuing operations:









Three Months Ended


Year Ended






December 31,


December 31,






2010

2009


2010

2009








Non-cash stock-based compensation included in:







Cost of operations


$    2,058

$   1,802


$    7,211

$    6,723


Sales and marketing


$    2,284

$   2,570


$    8,033

$    8,069


General and administrative


$    5,353

$   7,257


$  18,056

$  24,620


Income from discontinued operations


$         ―

$        39


$         ―

$       693












Three Months Ended


Year Ended






December 31,


December 31,






2010

2009


2010

2009








Non-cash interest expense







1.75% Convertible Notes


$          ―

$      302


$       885

$  1,272


3 1/8% Convertible Notes


$        732

$   2,166


$    4,996

$  8,933


Cash interest expense








1.75% Convertible Notes


$         ―

$   1,158


$    1,564

$  4,918


3 1/8% Convertible Notes


$       615

$   1,956


$    4,007

$  8,310






SOURCE WebMD

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