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WebMD Announces Fourth Quarter and Year End Financial Results

NEW YORK, Feb. 20, 2014 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced fourth quarter and full year financial results for 2013 that are consistent with the preliminary results announced on February 10, 2014.

"WebMD's fourth quarter and full year 2013 results reflected an improved macro environment, our continued progress in becoming a more customer-centric and efficient company, and a strengthening of our core advertising and sponsorship business," said David Schlanger, Chief Executive Officer, WebMD.  "We expect growth to continue in 2014 as we introduce new products and services. Looking ahead, we are investing in longer-term growth opportunities that leverage WebMD's brand, audience, and industry-leading platform, which should enable us to expand into new markets and realize new revenue streams."

Financial Highlights 
For the three months ended December 31, 2013:

For the twelve months ended December 31, 2013:

Traffic Highlights
Traffic to the WebMD Health Network during the fourth quarter reached a record average of 156 million unique users per month generating 3.17 billion page views for the quarter, increases of 33% and 23%, respectively, from the prior year period.

Balance Sheet Highlights
During the fourth quarter, WebMD received net proceeds of $291.8 million in cash upon issuance of $300 million aggregate principal amount of 1.50% Convertible Notes due 2020. During the fourth quarter, WebMD utilized: $211.3 million in cash to repurchase approximately 6.5 million shares of its common stock; and $48.6 million in cash to repurchase $47.8 million principal amount of its 2.25% Convertible Notes due 2016.

As of December 31, 2013, WebMD had: approximately $825 million in cash and cash equivalents; $952.2 million in aggregate principal amount of convertible notes outstanding; and approximately 40.3 million shares of its common stock outstanding (including approximately 1.2 million unvested shares of restricted stock).

As of today, WebMD has approximately $70 million currently available for repurchases in its authorized share buyback program.

Financial Guidance 
WebMD's financial guidance provided today is consistent with the preliminary outlook for 2014 provided in our February 10, 2014 press release.

For the first quarter of 2014:

For the full year 2014:

A schedule summarizing the Company's financial guidance is attached to this press release.

Analyst and Investor Conference Call 
WebMD will hold a conference call with investors and analysts 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.

The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, eMedicineHealth, RxList, theheart.org, Medscape Education and other owned WebMD sites.

*****************************

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 expected contracts with customers, 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 other factors affecting their use of our products and services, including regulatory matters affecting their products; our ability to successfully implement changes to, among other things, our product and service offerings, capital allocation plans and cost structure; our ability to attract and retain qualified personnel; 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 and this press release is intended to be read in conjunction with information contained in those 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®, CME Circle®, Medpulse®, eMedicine®, MedicineNet®, theheart.org® and RxList® are among the 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,



2013


2012


2013


2012










Revenue


$       146,277


$         132,738


$       515,293


$       469,866

Cost of operations


57,763


55,352


209,740


216,361

Sales and marketing


33,081


32,598


127,997


127,659

General and administrative


22,715


23,767


93,220


97,618

Depreciation and amortization


6,566


8,248


26,606


28,399

Interest income


22


22


76


86

Interest expense


5,329


5,834


22,826


23,334

Loss on convertible notes


1,575


-


4,871


-

Gain on investments


-


-


-


8,074

Restructuring


-


7,579


-


7,579

Other expense


-


-


1,353


2,297

Income (loss) from continuing operations before income








tax provision (benefit)


19,270


(618)


28,756


(25,221)


Income tax provision (benefit)


8,458


5,470


13,640


(2,134)

Income (loss) from continuing operations


10,812


(6,088)


15,116


(23,087)


Income from discontinued operations, net of tax


-


-


-


2,743

Net income (loss)


$         10,812


$           (6,088)


$         15,116


$        (20,344)










Basic income (loss) per common share:










Income (loss) from continuing operations


$             0.27


$             (0.12)


$             0.32


$            (0.45)


Income from discontinued operations


-


-


-


0.05

Net income (loss)


$             0.27


$             (0.12)


$             0.32


$            (0.40)










Diluted income (loss) per common share (a):










Income (loss) from continuing operations


$             0.25


$             (0.12)


$             0.31


$            (0.45)


Income from discontinued operations


-


-


-


0.05

Net income (loss)


$             0.25


$             (0.12)


$             0.31


$            (0.40)










Weighted-average shares outstanding used in 










computing income (loss) per common share: 










Basic


40,457


49,041


46,830


50,862


Diluted


44,872


49,041


48,398


50,862



(a)

 See schedule of Net Income (Loss) Per Common Share below.

 

 

WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

 (In thousands, unaudited)






















Three Months Ended


Years Ended




December 31,


December 31,




2013


2012


2013


2012

Revenue










Public portal advertising and sponsorship


$      124,353


$      112,257


$      433,182


$      391,339


Private portal services


21,924


20,481


82,111


78,527




$      146,277


$      132,738


$      515,293


$      469,866











Earnings before interest, taxes, non-cash










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


$        40,636


$        30,049


$      122,886


$        73,149











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










Interest income


22


22


76


86


Interest expense


(5,329)


(5,834)


(22,826)


(23,334)


Income tax (provision) benefit


(8,458)


(5,470)


(13,640)


2,134


Depreciation and amortization 


(6,566)


(8,248)


(26,606)


(28,399)


Non-cash stock-based compensation


(7,918)


(9,028)


(38,550)


(44,921)


Loss on convertible notes


(1,575)


-


(4,871)


-


Gain on investments


-


-


-


8,074


Restructuring


-


(7,579)


-


(7,579)


Other expense


-


-


(1,353)


(2,297)

Income (loss) from continuing operations


10,812


(6,088)


15,116


(23,087)


 Income from discontinued operations, net of tax 


-


-


-


2,743

 Net income (loss) 


$        10,812


$        (6,088)


$        15,116


$      (20,344)











(a)

See Annex A-Explanation of Non-GAAP Financial Measures.

(b)

Reconciliation of Adjusted EBITDA to net income (loss).

 

 

WEBMD HEALTH CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (In thousands, unaudited)




December 31,




2013


2012







Assets





Cash and cash equivalents


$                 824,880


$                       991,835

Accounts receivable, net


124,232


106,622

Prepaid expenses and other current assets


13,243


13,882

Deferred tax assets


13,620


10,328

        Total current assets


975,975


1,122,667







Property and equipment,  net


64,884


66,604

Goodwill


202,980


202,104

Intangible assets, net


13,834


16,105

Deferred tax assets


38,802


56,039

Other assets


29,153


27,106

Total Assets


$              1,325,628


$                    1,490,625







Liabilities and Stockholders' Equity





Accrued expenses


$                   73,739


$                         64,256

Deferred revenue


85,148


92,176

Liabilities of discontinued operations


1,506


1,506

      Total current liabilities


160,393


157,938







2.25% convertible notes due 2016


252,232


400,000

2.50% convertible notes due 2018


400,000


400,000

1.50% convertible notes due 2020


300,000


-

Other long-term liabilities


22,103


22,698







Stockholders' equity


190,900


509,989







Total Liabilities and Stockholders' Equity


$              1,325,628


$                    1,490,625

 

 

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)























Years Ended







December 31,







2013


2012

Cash flows from operating activities:






Net income (loss)


$           15,116


$      (20,344)


Adjustments to reconcile net income (loss) to net cash provided by






  operating activities:







Income from discontinued operations, net of tax


-


(2,743)



Depreciation and amortization


26,606


28,399



Non-cash interest, net


4,192


4,326



Non-cash stock-based compensation


38,550


44,921



Deferred income taxes


13,070


(2,337)



Loss on convertible notes


4,871


-



Gain on investments


-


(8,074)



Changes in operating assets and liabilities:








Accounts receivable


(17,610)


14,713




Prepaid expenses and other, net


266


(1,589)




Accrued expenses and other long-term liabilities


8,061


9,429




Deferred revenue


(7,028)


4,121





Net cash provided by continuing operations


86,094


70,822





Net cash provided by discontinued operations


-


4,324





Net cash provided by operating activities


86,094


75,146










Cash flows from investing activities:






Proceeds received from ARS option


-


9,269


Purchases of property and equipment


(22,341)


(35,171)


Proceeds from sale of property and equipment


1,381


-





Net cash used in investing activities


(20,960)


(25,902)










Cash flows from financing activities:






Proceeds from exercise of stock options


29,724


827


Cash used for withholding taxes due on stock-based awards


(12,526)


(2,740)


Net proceeds from issuance of convertible notes


291,823


-


Repurchase of convertible notes


(150,354)


-


Repurchase of shares through tender offers


(170,516)


(150,759)


Purchases of treasury stock 


(220,298)


(26,331)


Excess tax benefit on stock-based awards


58


377





Net cash used in financing activities


(232,089)


(178,626)

Net decrease in cash and cash equivalents


(166,955)


(129,382)

Cash and cash equivalents at beginning of period


991,835


1,121,217

Cash and cash equivalents at end of period


$         824,880


$      991,835

 

 

WEBMD HEALTH CORP.

NET INCOME (LOSS) PER COMMON SHARE

 (In thousands, except per share data, unaudited)





























Three Months Ended


Years Ended






December 31,


December 31,






2013


2012


2013


2012















Numerator:











Income (loss) from continuing operations — Basic


$     10,812


$           (6,088)


$        15,116


$      (23,087)




Interest expense on 1.50% convertible notes, net of tax


326


-


-


-



Income (loss) from continuing operations — Diluted


$     11,138


$           (6,088)


$        15,116


$      (23,087)















Income from discontinued operations, net of tax — Basic and Diluted


$             -


$                  -


$               -


$          2,743



























Denominator:











Weighted-average shares — Basic


40,457


49,041


46,830


50,862




Stock options and restricted stock


2,192


-


1,568


-




1.50% convertible notes


2,223


-


-


-



Adjusted weighted-average shares after assumed conversions — Diluted


44,872


49,041


48,398


50,862



























Basic income (loss) per common share:












Income (loss) from continuing operations


$         0.27


$             (0.12)


$            0.32


$          (0.45)




Income from discontinued operations


-


-


-


0.05



Net income (loss)


$         0.27


$             (0.12)


$            0.32


$          (0.40)















Diluted income (loss) per common share:












Income (loss) from continuing operations


$         0.25


$             (0.12)


$            0.31


$          (0.45)




Income from discontinued operations


-


-


-


0.05



Net income (loss)


$         0.25


$             (0.12)


$            0.31


$          (0.40)


 

 

WebMD Health Corp.

Financial Guidance for the Year Ending December 31, 2014

(in millions, except per share amounts)










Guidance Range









Revenue:




   Public portal advertising and sponsorship

$     450.0


$      475.0

   Private portal services

95.0


100.0


$     545.0


$      575.0

Earnings before interest, taxes, non-cash




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

$     140.0


$      155.0





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




   Interest expense, net

(25.0)


(25.0)

   Depreciation and amortization

(30.0)


(28.0)

   Non-cash stock-based compensation

(35.0)


(32.0)

Pre-tax income 

50.0


70.0





Income tax provision

(23.0)


(31.0)





Net income

$       27.0


$        39.0





Income per share:




     Basic

$       0.68


$        0.95

     Diluted (c) 

$       0.63


$        0.84





Calculation of income per share:








Net income (numerator for basic income per share)

$       27.0


$        39.0

Add-back of interest expense on 1.50% Notes, net of tax

3.5


3.5

   Numerator for diluted income per share

$       30.5


$        42.5





Weighted average shares outstanding (denominator for basic income per share)

40.0


41.0

Stock options and restricted stock

3.0


4.0

Weighted average shares issuable upon conversion of 1.50% Notes

5.7


5.7

   Denominator for diluted income per share

48.7


50.7













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








(b) Reconciliation of Adjusted EBITDA to net income.








(c) See Supplemental 2014 Guidance for Income Per Share Calculation below.


Additional information regarding forecast for the quarter ending March 31, 2014:

     -     Revenue is forecasted to be between $130 million to $133 million.

     -     Adjusted EBITDA is forecasted to be between $28.5 million to $30.5 million.

     -     Net income as a percentage of revenue is forecasted to be approximately 3% to 4%.


The above guidance does not include the impact if any, of future deployment of capital for items such as share repurchases or acquisitions, any future gains or losses from discontinued operations, and other future non-recurring, one-time or unusual items. 

 

 

WebMD Health Corp.

Supplemental 2014 Guidance for Income Per Share Calculation





















Based on the Company's Financial Guidance for the Year Ending December 31, 2014, the 2.50% Notes and 2.25% Notes are not expected to be dilutive to the full year.  However, the 1.50% Notes are expected to be dilutive to the full year.  Additionally, each of the series of Notes may be dilutive in certain quarters, depending on the amount of net income for such quarter.  The following table contains the approximate level of net income for an individual quarter and for the full year 2014 at which each of the series of Notes would become dilutive to income per share.  To the extent this net income is exceeded for any such period, the table also includes the amounts by which the numerator and denominator should each be adjusted for purposes of the diluted income per share calculation.   The amounts below assume a weighted-average diluted share count of 43 million shares (prior to the effect of convertible notes) and the amounts below are subject to change as such weighted-average share count changes.


























Quarterly Amounts


Annual Amounts

All amounts in millions

1.50% Notes


2.50% Notes


2.25% Notes


1.50% Notes


2.50% Notes


2.25% Notes













Approximate net income at which

convertible notes become dilutive:

$         6.5


$       13.3


$       14.6


$       26.2


$       53.1


$       58.5













Interest expense, net of tax to add-back to

net income (numerator):

$         0.9


$         1.8


$         1.1


$         3.5


$         7.2


$         4.4













Additional shares to include in weighted-

average diluted share count (denominator):

5.7


6.2


3.5


5.7


6.2


3.5

 

 

ANNEX A


Explanation of Non-GAAP Financial Measures



The accompanying WebMD Health Corp. press release and attachments 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 net income or loss calculated in accordance with GAAP (referred to below as "net income") or income or loss from continuing operations calculated in accordance with GAAP (referred to below as "income from continuing operations").  The attachments to the press release 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 net income or income from continuing operations.  In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some 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 net income or 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 or income from continuing operations that accompany our press releases and disclosure documents containing non-GAAP financial measures, including the reconciliations contained in the accompanying press release attachments.


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 net income or income from continuing operations, 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 net income or income from continuing operations.  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 net income and income from continuing operations:

 

 









Three Months Ended


Year Ended









December 31,


December 31,









2013

2012


2013

2012














Non-cash stock-based compensation included in:










Cost of operations


$    1,728

$    1,484


$    6,762

$    8,160





Sales and marketing


$    1,809

$    1,804


$    8,395

$    8,201





General and administrative


$    4,381

$    5,740


$  23,393

$  28,560

 

 









Three Months Ended


Year Ended









December 31,


December 31,









2013

2012


2013

2012














Non-cash interest expense










2.50% Convertible Notes


$         446

$       452


$    1,802

$    1,807





2.25% Convertible Notes


$         390

$       630


$    2,279

$    2,519





1.50% Convertible Notes


$         111

$    —


$       111

$    —




 

Cash interest expense











2.50% Convertible Notes


$     2,500

$   2,500


$  10,000

$  10,000





2.25% Convertible Notes


$     1,457

$   2,250


$    8,207

$    9,000





1.50% Convertible Notes


$        425

$    —


$       425

$    —

 

 

SOURCE WebMD Health Corp.

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