WebMD Announces Second Quarter Financial Results
WebMD Total Revenue Increased 24%; Advertising Revenue Increased 32%
WebMD Adjusted EBITDA Increased 71%
WebMD Increases 2010 Financial Guidance
NEW YORK, Aug. 3 /PRNewswire-FirstCall/ -- WebMD Health Corp. (Nasdaq:WBMD - News), the leading source of health information, today announced financial results for the three months ended June 30, 2010.
For the three months ended June 30, 2010:
- Revenue was $122.7 million, compared to $98.6 million in the prior year period, an increase of 24%.
- Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") was $34.3 million, compared to $20.0 million in the prior year period, an increase of 71%.
- Net income was $7.7 million or $0.13 per share, compared to a net loss of $(11.7) million or $(0.25) per share in the prior year period.
"WebMD is steadily establishing itself as an essential marketing channel for the nation's largest biopharma and consumer products companies," said Wayne Gattinella, President and CEO. "With advertising revenue growth of 32% and expanding operating margins, our core online business continues to outpace the growth of the online advertising markets overall."
Revenue for the second quarter was $122.7 million, compared to $98.6 million in the prior year period, an increase of 24%. Specifically:
- Public portal advertising and sponsorship revenue was $100.6 million for the second quarter, compared to $76.0 million in the prior year period, an increase of 32%. Traffic to the WebMD Health Network continued to grow, reaching an average of 80.7 million unique users per month and total traffic of 1.8 billion page views during the second quarter, increases of 35% and 22%, respectively, from a year ago. 1.5 million continuing medical education (CME) programs were completed on the WebMD Professional Network during the second quarter.
- Private portal services revenue was $22.1 million for the second quarter, a decrease of $500 thousand from the prior year period. The base of large employers and health plans using WebMD's private Health and Benefits portals during the second quarter was 129 as compared to 137 in the prior year period.
Adjusted EBITDA for the second quarter was $34.3 million, compared to $20.0 million in the prior year period, an increase of 71%.
Net income was $7.7 million or $0.13 per share, compared to a net loss of $(11.7) million or $(0.25) per share in the prior year period. Net income in the current period included the after tax impact of a gain on investments of $3.6 million and a loss on convertible notes of $(6.6) million. Net loss in the prior year period included the after tax impact of a gain on convertible notes of $2.2 million, a loss from discontinued operations of $(13.3) million and non-controlling interest of $(0.4) million. Net income would have been $10.7 million in the current period as compared to a net loss of $(0.2) million in the prior year period excluding these items.
During the second quarter:
- WebMD received cash proceeds of $65.5 million from the sale of the Senior Secured Notes it received as consideration in the sale of HLTH's Porex business.
- WebMD received $286 million in cash from the sale of its auction rate securities investments and has retained the ability to receive the upside on the auction rate securities through April 2012.
- WebMD repurchased $32.4 million face amount and had conversions of $232.1 million face amount of the Company's 1.75% convertible notes.
- WebMD repurchased $12.9 million face amount and had conversions of $12.7 million face amount of the Company's 3 1/8% convertible notes.
- WebMD completed a tender offer to repurchase approximately 5.2 million shares for $242 million in cash.
As of June 30, 2010, WebMD had $535 million in cash and investments and had approximately $121 million in aggregate principal amount of its 3 1/8% convertible notes outstanding.
WebMD's penetration into the mobile health information market continued to expand this quarter:
- WebMD Mobile for iPhone/iTouch has generated nearly two million downloads since launch and the newest release introduces an improved user interface and new features including local health listings.
- WebMD Mobile for the iPad launched during the quarter with over 400,000 downloads to date. WebMD Mobile for the iPad allows users to check their symptoms, access drug and treatment information, get first aid essentials and check local health listings on the go.
- Medscape Mobile for physicians has attracted over 450,000 users since launch and, with availability on both the iPhone/iTouch and Blackberry, it is becoming the premier clinical reference tool at the point of care.
WebMD is increasing its financial guidance for 2010 today.
- The range for revenue guidance increases to $515 million to $535 million (from $510 million to $525 million).
- The range for Adjusted EBITDA guidance increases to $158 million to $168 million (from $150 million to $158 million).
WebMD is providing a schedule (attached to this press release) to reflect these increases as well as updates for non-cash and other items primarily to reflect the impact of the sale of investments and convertible note conversions and repurchases completed by WebMD during the second quarter of 2010.
For the third quarter of 2010, WebMD expects:
- Revenue to be in excess of $133 million, an increase in excess of 19% from last year. Public portal advertising and sponsorship revenue is expected to grow in excess of 24%.
- Adjusted EBITDA to be in excess of 32% of revenue.
- Net income to be in excess of 9% of revenue.
Analyst and Investor Conference Call
As previously announced, WebMD will hold a conference call with investors and analysts to discuss its second 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.
WebMD Health Corp. (Nasdaq:WBMD - News) 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. Approximately 80 million unique visitors access the WebMD Health Network each month.
The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, eMedicine, eMedicine Health, RxList, theHeart.org and drugs.com.
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; the benefits expected from new or updated products or services and from other potential sources of additional revenue; and expectations regarding the market for investments in auction rate securities (ARS). 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; changes in the markets for ARS; 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®, WebMD® Health Exchange and Medscape® Mobile are trademarks of WebMD Health Corp. or its subsidiaries.
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:
- 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. We exclude depreciation and amortization expense from Adjusted EBITDA because we believe that (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our 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, we believe that this exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that the 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 expense 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. We believe 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 (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our 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, we believe that excluding stock-based compensation from Adjusted EBITDA assists management and investors in making meaningful comparisons between our 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 Consolidated Statement of Operations are summarized as follows:
- 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 in 2000. The advertising was available only on various Newscorp properties, primarily its television network and cable channels, without any cash cost to us and expired in 2009. We exclude 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 we may otherwise incur and (iii) to assist management and investors in comparing its operating results over multiple periods. Investors should note that it is likely that we derived some benefit from such advertising. Non-cash advertising expenses included in the Consolidated Statement of Operations in Sales and Marketing expense were $1,753 for the six months ended June 30, 2009.
- Interest Income and Expense. Interest income is associated with the level of marketable debt securities and other interest bearing accounts in which we invest, as well as with interest expense arising from our company's capital structure (including non-cash interest expense relating to our convertible notes). Interest income and expense varies over time due to a variety of financing transactions and due to acquisitions and divestitures that we have entered into or may enter into in the future. We have, in the past, issued convertible debentures, repurchased shares in cash tender offers and repurchased shares and convertible debentures through other repurchase transactions, and completed the divestiture of certain businesses. We exclude interest income and interest expense from Adjusted EBITDA (i) because these items are not directly attributable to the performance of our 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 and expense will recur in future periods. The following provides detail of the components of interest expense of our convertible notes:
- Income Tax Provision (Benefit). We maintain a valuation allowance on a portion of our net deferred tax assets (including our net operating loss carryforwards), the amount of which may change from quarter to quarter based on factors that are not directly related to our results for the quarter. The valuation allowance is either reversed through the statement of operations or additional paid-in capital. The timing of such reversals has not been consistent and as a result, our income tax expense can fluctuate significantly from period to period in a manner not directly related to our operating performance. We exclude the income tax provision (benefit) from Adjusted EBITDA (i) because we believe that the income tax provision (benefit) is not directly attributable to the underlying performance of our 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 (benefit) will recur in future periods.
- Other Items. We engage in other activities and transactions that can impact our overall consolidated income (loss) from continuing operations. In recent periods, these other items have included, but were not limited to, (i) legal expenses relating to the ongoing Department of Justice investigation, (ii) gain or loss on repurchases and conversions of our convertible notes, (iii) a reduction of certain sales and use tax contingencies resulting from the expiration of certain applicable statutes of limitations, (iv) advisory expenses relating to the merger of HLTH Corporation into our company in 2009, (v) gain or loss on investments, and (vi) restructuring charge. We exclude these other items from Adjusted EBITDA because we believe these activities or transactions are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that some of these other items may recur in future periods.