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WebMD Announces Third Quarter Financial Results

WebMD Total Revenue Increased 21%; Advertising Revenue Increased 26%
WebMD Adjusted EBITDA Increased 46%

NEW YORK, Nov. 3, 2010 /PRNewswire-FirstCall/ -- WebMD Health Corp. (Nasdaq: WBMD), the leading source of health information, today announced financial results for its third quarter ended September 30, 2010:


"Our strong financial and operating performance underscores WebMD's continued momentum in providing the most valuable brand of health and wellness information to the marketplace today," said Wayne Gattinella, President and CEO. "The scale and engagement of the WebMD consumer and physician audiences are drawing more dollars from traditional marketing channels as the transformation to digital marketing in the health sector takes hold."

Financial Summary

Revenue for the third quarter was $135.3 million, compared to $111.6 million in the prior year period, an increase of 21%.

Public portal advertising and sponsorship revenue was $113.1 million for the third quarter, compared to $89.4 million in the prior year period, an increase of 26%. Traffic to the WebMD Health Network continued to grow, reaching an average of 83.3 million unique users per month and total traffic of 1.8 billion page views during the third quarter, increases of 41% and 23%, respectively, from a year ago. 1.5 million continuing medical education (CME) programs were completed on the WebMD Professional Network during the third quarter.

Private portal services revenue was $22.2 million for the third quarter which was consistent with the prior year period. The base of large employers and health plans using WebMD's private Health and Benefits portals during the third quarter was 124.

During the third quarter, WebMD repurchased $9.9 million principal amount of its 3 1/8% convertible notes and had conversions of $26.2 million principal amount of the notes, which resulted in the issuance of approximately 750 thousand shares of WebMD common stock.

WebMD utilized $156 million in cash to complete a tender offer for 3 million shares of its common stock during the third quarter.

As of September 30, 2010, WebMD had approximately $352 million in cash and cash equivalents and approximately $85 million in aggregate principal amount of its 3 1/8% convertible notes outstanding.

Financial Guidance

WebMD increased its financial guidance for 2010 today based on year-to-date actual results and its outlook for the fourth quarter.

For the fourth quarter of 2010, WebMD expects:


For the year ended December 31, 2010, WebMD expects:  


WebMD is providing a schedule (attached to this press release) to reflect these changes as well as updates for non-cash and other items primarily to reflect the impact of convertible note conversions and repurchases and the tender offer completed by WebMD during the third quarter of 2010.

Analyst and Investor Conference Call

As previously announced, WebMD will hold a conference call with investors and analysts to discuss its third 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 and health-focused publications.

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; 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


Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009









Revenue

$ 135,305


$ 111,568


$ 366,042


$ 300,463

Cost of operations

47,610


41,965


135,972


117,759

Sales and marketing

28,957


26,265


86,789


80,623

General and administrative

22,964


21,967


62,350


65,818

Depreciation and amortization

6,935


7,134


20,268


21,193

Interest income

21


1,840


3,850


6,060

Interest expense

1,797


5,541


10,106


17,858

(Loss) gain on convertible notes

(2,232)


-


(16,970)


10,120

Loss on investments

131


-


22,977


-

Other income (expense), net

107


(123)


(92)


(944)

Income from continuing operations before income tax provision (benefit)

24,807


10,413


14,368


12,448


Income tax provision (benefit)

10,193


5,389


(4,140)


4,922

Consolidated income from continuing operations

14,614


5,024


18,508


7,526


Consolidated (loss) income from discontinued operations, net of tax

(1,024)


27,462


(1,024)


14,695

Consolidated net income inclusive of noncontrolling interest

13,590


32,486


17,484


22,221


Income attributable to noncontrolling interest

-


(2,184)


-


(3,181)

Net income attributable to Company stockholders

$   13,590


$   30,302


$   17,484


$   19,040










Amounts attributable to Company stockholders:









Income from continuing operations

$   14,614


$     2,872


$   18,508


$     3,381


(Loss) income from discontinued operations

(1,024)


27,430


(1,024)


15,659

Net income attributable to Company stockholders

$   13,590


$   30,302


$   17,484


$   19,040










Basic income (loss) per common share:









Income from continuing operations

$       0.25


$       0.06


$       0.33


$       0.07


(Loss) income from discontinued operations

(0.02)


0.59


(0.01)


0.34

Net income attributable to Company stockholders

$       0.23


$       0.65


$       0.32


$       0.41










Diluted income (loss) per common share:









Income from continuing operations

$       0.24


$       0.05


$       0.31


$       0.06


(Loss) income from discontinued operations

(0.02)


0.56


(0.02)


0.33

Net income attributable to Company stockholders

$       0.22


$       0.61


$       0.29


$       0.39










Weighted-average shares outstanding used in computing  income (loss) per common share:








     Basic

58,095


46,096


54,602


45,637

     Diluted

61,435


48,609


58,660


47,167



WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands, unaudited)










Three Months Ended


Nine Months Ended




September 30,


September 30,




2010


2009


2010


2009

Revenue










Public portal advertising and sponsorship


$ 113,078


$   89,414


$ 299,927


$ 232,695


Private portal services


22,227


22,154


66,115


67,768




$ 135,305


$ 111,568


$ 366,042


$ 300,463











Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") (a)


$   44,578


$   30,564


$ 104,536


$   65,846











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










Interest income


21


1,840


3,850


6,060


Interest expense


(1,797)


(5,541)


(10,106)


(17,858)


Income tax (provision) benefit


(10,193)


(5,389)


4,140


(4,922)


Depreciation and amortization


(6,935)


(7,134)


(20,268)


(21,193)


Non-cash stock-based compensation


(8,804)


(9,217)


(23,605)


(27,783)


Non-cash advertising


-


-


-


(1,753)


(Loss) gain on convertible notes


(2,232)


-


(16,970)


10,120


Loss on investments


(131)


-


(22,977)


-


Other income (expense), net


107


(99)


(92)


(991)

Consolidated income from continuing operations


14,614


5,024


18,508


7,526


Consolidated (loss) income from discontinued operations, net of tax


(1,024)


27,462


(1,024)


14,695

Consolidated net income inclusive of noncontrolling interest


13,590


32,486


17,484


22,221


Income attributable to noncontrolling interest


-


(2,184)


-


(3,181)

Net income attributable to Company stockholders


$   13,590


$   30,302


$   17,484


$   19,040











(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)
















September 30, 2010


December 31, 2009

Assets





Cash and cash equivalents


$                   352,199


$               459,766

Accounts receivable, net


120,361


118,155

Prepaid expenses and other current assets


17,055


11,419

Investments


-


9,932

Deferred tax assets


27,346


-

       Total current assets


516,961


599,272







Investments


-


338,446

Property and equipment,  net


62,221


52,194

Goodwill


202,104


202,104

Intangible assets, net


23,388


26,020

Deferred tax assets


78,631


50,789

Other assets


17,407


19,723

Total Assets


$                   900,712


$            1,288,548







Liabilities and Equity





Accrued expenses


$                     63,832


$                 63,721

Deferred revenue


101,887


98,474

1.75% convertible notes


-


264,583

Deferred tax liabilities


-


12,955

Liabilities of discontinued operations


20,574


34,197

     Total current liabilities


186,293


473,930







3 1/8% convertible notes, net of discount of $5,693 at September 30, 2010 and $22,641 at December 31, 2009


79,634


227,659

Other long-term liabilities


24,263


22,191







Stockholders' equity


610,522


564,768







Total Liabilities and Equity


$                   900,712


$            1,288,548



WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)























Nine Months Ended







September 30,







2010


2009

Cash flows from operating activities:






Consolidated net income inclusive of noncontrolling interest


$        17,484


$        22,221


Adjustments to reconcile consolidated net income inclusive of noncontrolling interest to net cash provided by operating activities:







Consolidated loss (income) from discontinued operations, net of tax


1,024


(14,695)



Depreciation and amortization


20,268


21,193



Non-cash interest, net


4,862


7,737



Non-cash advertising


-


1,753



Non-cash stock-based compensation


23,605


27,783



Deferred income taxes


(17,260)


7,563



Loss (gain) on convertible notes


16,970


(10,120)



Loss on investments


22,977


-



Changes in operating assets and liabilities:








Accounts receivable


(2,206)


6,010




Prepaid expenses and other, net


(3,006)


(8,394)




Accrued expenses and other long-term liabilities


1,695


(7,740)




Deferred revenue


3,413


4,248





Net cash provided by continuing operations


89,826


57,559





Net cash (used in) provided by discontinued operations


(17,082)


9,273





Net cash provided by operating activities


72,744


66,832










Cash flows from investing activities:






Proceeds from sales of available-for-sale securities


362,259


2,200


Purchases of property and equipment


(20,329)


(14,248)


Finalization of sale price of discontinued operations


(1,430)


2,840





Net cash provided by (used in) continuing operations


340,500


(9,208)





Net cash used in discontinued operations


-


(3,315)





Net cash provided by (used in) investing activities


340,500


(12,523)










Cash flows from financing activities:






Proceeds from exercise of stock options


57,168


30,004


Cash used for withholding taxes due on stock-based awards


(76,559)


(1,234)


Repurchases of convertible notes


(94,475)


(123,857)


Purchase of treasury stock under repurchase program


(14,914)


-


Payment for shares tendered in 2009, delivered in 2010


(6,818)


-


Purchase of treasury stock in tender offers


(399,216)


-


Excess tax benefit on stock-based awards


14,003


63





Net cash used in financing activities


(520,811)


(95,024)

Effect of exchange rates on cash


-


420

Net decrease in cash and cash equivalents


(107,567)


(40,295)

Cash and cash equivalents at beginning of period


459,766


629,848

Cash and cash equivalents at end of period


$      352,199


$      589,553



WEBMD HEALTH CORP.

CONSOLIDATED NET INCOME ATTRIBUTABLE TO COMPANY STOCKHOLDERS

(In thousands, except per share data, unaudited)





Three Months Ended


Nine Months Ended




September 30,


September 30,




2010


2009


2010


2009











Numerator:









Income from continuing operations


$14,614


$  2,872


$18,508


$  3,381


Effect of participating non-vested restricted stock


(152)


(31)


(222)


(37)

Income from continuing operations - Basic


14,462


2,841


18,286


3,344


Effect of dilutive securities of subsidiary


-


(188)


-


(285)

Income from continuing operations - Diluted


$14,462


$  2,653


$18,286


$  3,059











(Loss) income from discontinued operations


$ (1,024)


$27,430


$ (1,024)


$15,659


Effect of participating non-vested restricted stock


12


(293)


12


(171)

(Loss) income from discontinued operations --Basic


(1,012)


27,137


(1,012)


15,488


Effect of dilutive securities of subsidiary


-


(3)


-


53

(Loss) income from discontinued operations --Diluted


$ (1,012)


$27,134


$ (1,012)


$15,541











Denominator:









Weighted-average shares — Basic


58,095


46,096


54,602


45,637


Employee stock options and restricted stock


3,340


2,513


4,058


1,530

Adjusted weighted-average shares after assumed conversions - Diluted


61,435


48,609


58,660


47,167











Basic income (loss) per common share:










Income from continuing operations


$    0.25


$    0.06


$    0.33


$    0.07


(Loss) income from discontinued operations


(0.02)


0.59


(0.01)


0.34

Net income attributable to Company stockholders


$    0.23


$    0.65


$    0.32


$    0.41











Diluted income (loss) per common share:










Income from continuing operations


$    0.24


$    0.05


$    0.31


$    0.06


(Loss) income from discontinued operations


(0.02)


0.56


(0.02)


0.33

Net income attributable to Company stockholders


$    0.22


$    0.61


$    0.29


$    0.39



WebMD Health Corp.

2010 Financial Guidance

(in millions)





















Quarter Ended


Year Ended



December 31, 2010


December 31, 2010



$


As % of
Revenue


$


As % of
Revenue










Revenue - in excess of


$ 165.0


100%


$ 531.0


100%










Earnings before interest, taxes, non-cash









 and other items ("Adjusted EBITDA") - in excess of




40%




32%










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









Interest expense, net




-1.0%




-1.5%

Depreciation and amortization




-5.0%




-5.4%

Non-cash stock-based compensation




-6.0%




-6.3%

Loss on convertible notes (b)




0.0%




-3.2%

Loss on investments (b)




0.0%




-4.3%

Other expenses, net (b)




0.0%




0.0%

Consolidated pre-tax income from continuing operations - in excess of




28.0%




11.3%










Income tax provision




-12.0%




-3.0%










Consolidated income from continuing operations - in excess of




16.0%




8.3%



















(a)  Reconciliation of Adjusted EBITDA to consolidated income from continuing operations; See Annex A - Explanation of Non-GAAP Financial Measures.


(b)  The above table reflects actual amounts through September 30, 2010 for "loss on convertible notes," "loss on investments" and "other expenses, net" but does not reflect guidance for these items for the quarter ending December 31, 2010 in either column. We do not make projections for these items, although they may recur in future quarters.


Additional information regarding fourth quarter and full year 2010 forecast:

  • Income tax rate is forecasted to be approximately 42% of pretax income for the fourth quarter of 2010.  
  • The distribution of the revenue is expected to be approximately 87% public portal advertising and sponsorship and 13% private portal services for the fourth quarter of 2010.
  • Weighted- average basic and diluted shares outstanding for the fourth quarter of 2010 is expected to be approximately 57 million and 63 million, respectively.  The weighted-average diluted shares outstanding for the fourth quarter of 2010 includes approximately 2.4 million shares related to outstanding 3 1/8 % Notes as these Notes are expected to be dilutive to earnings per share for the fourth quarter.
  • Weighted-average basic and diluted shares outstanding for full year 2010 is expected to be approximately 55 million and 63 million, respectively.  The weighted-average diluted shares outstanding for the full year 2010 does not include any shares related to outstanding 3 1/8 % Notes as these Notes are not expected to be dilutive to earnings per share for the full year 2010.


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


Nine Months Ended


September 30,


September 30,


2010

2009


2010

2009







Non-cash stock-based compensation included in:







Cost of operations

$    1,889

$   1,743


$    5,153

$    4,921


Sales and marketing

$    1,867

$   1,948


$    5,749

$    5,499


General and administrative

$    5,048

$   5,526


$  12,703

$  17,363


Income (loss) from discontinued operations

$          --

$      112


$          --

$       654






Three Months Ended


Nine Months Ended


September 30,


September 30,


2010

2009


2010

2009








Non-cash interest expense







1.75% Convertible Notes

$          --

$      303


$       885

$     970


3 1/8% Convertible Notes

$       977

$   2,124


$    4,264

$  6,767

Cash interest expense







1.75% Convertible Notes

$          --

$   1,157


$    1,564

$  3,760


3 1/8% Convertible Notes

$       820

$   1,955


$    3,392

$  6,354





SOURCE WebMD

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