NEW YORK, Oct 16, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- WebMD Health Corp. (Nasdaq: WBMD), the leading provider of health information services, today announced preliminary financial results for the three months ended September 30, 2007.
Preliminary Results for the Three Months Ended September 30, 2007
WebMD expects that it will report the following financial results for the third quarter of 2007:
-- Revenue of $86.0 to $87.0 million, an increase of approximately 30% over the $66.6 million reported in the prior year period. Prior guidance was $89.0 to $94.0 million. -- Earnings before interest, taxes, depreciation, amortization, and other non-cash items ("Adjusted EBITDA") of $22.8 to $23.8 million, an increase of approximately 59% over the $14.6 million reported in the prior year period. Prior guidance was $22.0 to $24.5 million. -- Net income of $10.8 to $11.7 million as compared to $0.5 million reported in the prior year period. Prior guidance was $8.2 to $10.6 million.
Traffic to The WebMD Health Network was approximately 40 million average monthly unique visitors and 860 million page views, an increase of 24% and 18%, respectively, over the prior year. 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 visitors to The WebMD Health Network increased approximately 32% and page view traffic increased approximately 22%.
"We continued to experience strong sales growth of advertising and sponsorship programs in the pharmaceutical, bio-tech and medical device markets this past quarter. However, the timing of the launch of these programs is more weighted to 2008 than we had expected. Additionally, as we have previously discussed, we have been experiencing a lengthened sales and implementation cycle in our private portals business. Our Adjusted EBITDA continues to demonstrate that we are realizing the benefits of our investments in infrastructure improvements," said Wayne Gattinella, President and CEO of WebMD.
The above information is preliminary. WebMD is completing its normal closing process and will provide third quarter financial results and revised financial guidance for the fourth quarter on November 7, 2007.
WebMD and Yahoo! Sign Exclusive Multi-Year Search and Advertising Distribution Agreements
In a separate release today, WebMD and Yahoo! Inc. announced that they had entered into exclusive, multi-year search and advertising distribution agreements. Under the new agreements, WebMD will extend its advertising reach to include WebMD users across Yahoo! properties and services. WebMD will be the only significant online health publisher to represent Yahoo!'s advertising inventory. In addition, Yahoo! will power sponsored search across the WebMD network of consumer sites, including WebMD Health, MedicineNet, eMedicine Health and RxList.
"These strategic agreements, which dramatically extend WebMD's ability to uniquely reach health-involved consumers across the breadth of both WebMD and Yahoo! properties, will create incremental revenue opportunities for us," said Wayne Gattinella, President and CEO of WebMD. "We're pleased to bring Yahoo's world class sponsored search capability to WebMD users as they seek credible health information on our network of consumer sites."
WebMD and HLTH Third Quarter Earnings Release Date and Joint Conference Call
WebMD and HLTH Corporation (Nasdaq: HLTH), which owns 84% of WebMD's common stock, will release their respective financial results for the three months ended September 30, 2007 at approximately 4:00 pm (ET) on Wednesday, November 7, 2007 and will host a joint conference call on that day at 4:45 pm (ET) to discuss those results. As indicated by HLTH Corporation at its Annual Meeting of Stockholders on September 18, 2007, it is exploring alternatives that could allow HLTH Corporation's stockholders to have a more direct investment in WebMD. An update is expected to be provided on the November 7, 2007 conference call. Investors can access the call via webcast at www.wbmd.com (in the Investor Relations section). A replay of the call and a copy of the press release with final financial results will be available at the same web address.
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: WebMD's preliminary third quarter results and other preliminary measures of WebMD's performance for that quarter (which reflect what WebMD expects to report and are subject to adjustment); 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 the agreements with Yahoo! referred to in this press release, from new products or services and from other potential sources of additional revenue; and explorations of alternatives that could allow HLTH Corporation's stockholders to have a more direct investment in WebMD. 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 WebMD's products and services; relationships with customers and strategic partners; changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet and information technology industries; and the feasibility of alternatives to allow HLTH Corporation's stockholders to have a more direct investment in WebMD. Further information about these matters can be found in our Securities and Exchange Commission filings. With respect to the preliminary financial information included in this press release, during WebMD's closing process and the preparation of final consolidated financial statements and related notes, WebMD may identify items that would require adjustments to amounts included in the preliminary results. 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 includes 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. Annex A attached to this press release includes 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 B.
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.
ANNEX A Q3 2007 Preliminary Consolidated Financial Results
and Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures (In thousands) Range for Q3 2007 Actual Q3 2006 (unaudited) (unaudited) Revenue $86,000 $87,000 $66,645 Adjusted EBITDA (a) $22,800 $23,800 $14,633 Reconciliation of Adjusted EBITDA to net income: Interest income $3,500 $3,500 $1,221 Depreciation and amortization (7,000) (7,000) (5,085) Non-cash stock-based compensation (5,700) (5,700) (7,221) Non-cash advertising (200) (200) (1,660) Income tax provision (2,600) (2,700) (1,398) Net income $10,800 $11,700 $490 (a) See Annex B - Explanation of Non-GAAP Financial Measures ANNEX B Explanation of Non-GAAP Financial Measures (All dollar amounts in thousands)
The accompanying WebMD Health Corp. press release includes both preliminary financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as preliminary 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"). Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, "net income" calculated in accordance with GAAP. Annex A attached to the accompanying press release includes a
reconciliation of preliminary 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 net income. 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 net income, 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 Annex A 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 net income, 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 "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 measure and net income 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 net income:
-- 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. -- 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. -- 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 these items are not directly attributable to the performance of WebMD's business operations and, accordingly, their 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 $240,000 as of the year ended December 31, 2006. Due to a limited history of generating taxable income, WebMD maintains a full valuation allowance on these NOL carryforwards. As WebMD uses these NOL carryforwards, the related valuation allowances are reversed through the income statement. The timing of such reversals is not 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.
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