Total Revenue Increased 15%; Advertising Revenue Increased 19%
Adjusted EBITDA Increased 33%; Net Income Increased 18%
WebMD Leads Online Health Information Sector with 48.4 Million Unique Monthly Users and 1.1 Billion Quarterly Page Views
NEW YORK, Aug. 5 /PRNewswire-FirstCall/ -- WebMD Health Corp.
(Nasdaq: WBMD) today announced financial results for the three months ended
June 30, 2008.
'The growing strength of the WebMD franchise was demonstrated again this
quarter by WebMD's leadership, strong year-over-year traffic growth and
continued new product innovation,' said Wayne Gattinella, President and CEO.
'WebMD is uniquely situated to capitalize on the shift to web-based marketing
and education to both consumers as well as physicians both here in the U.S.
and abroad.'
Financial Summary
Revenue for the second quarter was $89.2 million compared to $77.3 million
in the prior year period, an increase of 15%. Earnings before interest, taxes,
depreciation, amortization, and other non-cash items ('Adjusted EBITDA') for
the second quarter increased 33% to $19.8 million or $0.34 per share compared
to $14.9 million or $0.25 per share in the prior year period.
Income from continuing operations and net income for the second quarter
was $6.4 million or $0.11 per share, compared to income from continuing
operations of $5.1 million or $0.09 per share, and net income of $5.4 million
or $0.09 per share, in the prior year period.
WebMD had approximately $325 million in cash and investments at June 30,
2008.
Segment Operating Highlights
Online Services segment revenue was $84.6 million for the second quarter
compared to $72.9 million in the prior year period, an increase of 16%.
Advertising and sponsorship revenue increased 19% to $62.4 million. Private
portal licensing revenue increased 10% to $21.9 million. Online Services
segment Adjusted EBITDA increased 34% to $18.8 million compared to
$14.0 million in the prior year period.
Traffic to the WebMD Health Network continued to grow strongly with an
average of 48.4 million unique users per month and total traffic of
1.1 billion page views during the second quarter, increases of 20% and 24%,
respectively, from a year ago. In the second quarter, 1.3 million continuing
medical education (CME) programs were completed on the WebMD Professional
Network, an increase of 74% from the prior year period.
The base of large employers and health plans utilizing WebMD's private
Health and Benefits portals during the second quarter was 123 as compared to
108 a year ago.
Publishing and Other Services segment revenue was $4.6 million for the
second quarter compared to $4.4 million in the prior year period, an increase
of 5%. Publishing and Other Services segment Adjusted EBITDA was $1.0 million
compared to $0.86 million in the prior year period. WebMD's offline
professional medical reference and textbook publication business was sold on
December 31, 2007 and is reflected as a discontinued operation in the
Company's financial statements for prior periods.
Merger with HLTH
As previously announced, HLTH and WebMD entered into a definitive merger
agreement on February 20, 2008. Completion of the merger is conditioned upon,
among other things, approval of the stockholders of both HLTH and WebMD. HLTH
and WebMD expect to file a joint preliminary proxy statement/prospectus
relating to the merger shortly after the filing of their respective second
quarter Form 10-Q filings. Assuming that timely clearance is received from the
SEC, HLTH and WebMD expect to be in a position to hold stockholder meetings in
October 2008 to seek the necessary stockholder approvals. Those meetings would
also be the Annual Meetings for HLTH and WebMD.
Financial Guidance
WebMD reaffirmed its financial guidance for the remainder of 2008 today.
This guidance was provided on May 6, 2008 and can be found in a press release
and Form 8-K issued on that date.
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 pm (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. 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.
This press release does not constitute an offer of any securities for
sale. In connection with the proposed merger, HLTH and WebMD expect to file,
with the SEC, a proxy statement/prospectus as part of a registration statement
regarding the proposed transaction. Investors and security holders are urged
to read the proxy statement/prospectus because it will contain important
information about HLTH and WebMD and the proposed transaction. Investors and
security holders may obtain a free copy of the definitive proxy
statement/prospectus and other documents when filed by HLTH and WebMD with the
SEC at www.sec.gov or www.hlth.com or www.wbmd.com. Investors and security
holders are urged to read the proxy statement, prospectus and other relevant
material when they become available before making any voting or investment
decisions with respect to the merger.
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: expectations regarding
the market for WebMD's and HLTH's investments in auction rate securities
(ARS); our guidance on WebMD's future financial results and other projections
or measures of WebMD's future performance; market opportunities and WebMD's
ability to capitalize on them; the benefits expected from new products or
services and from other potential sources of additional revenue; the merger
transaction between HLTH and WebMD (the 'Merger Transaction'); and the
potential sales transaction with respect to Porex (the 'Potential Sale
Transaction'). 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: changes
in the markets for ARS; market acceptance of WebMD's products and services;
WebMD's 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 other Securities and
Exchange Commission filings. In addition, there can be no assurances
regarding: whether HLTH and WebMD will be able to complete the Merger
Transaction or as to the timing of such transaction; or whether HLTH will be
able to complete the Potential Sale Transaction or as to the timing or terms
of such transaction. 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(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.
WEBMD HEALTH CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenue $89,176 $77,270 $170,858 $149,214
Costs and expenses:
Cost of operations 32,763 28,997 64,333 57,615
Sales and marketing 25,460 21,929 51,290 44,799
General and administrative 14,614 15,981 28,389 31,486
Impairment of auction rate
securities - - 27,406 -
Depreciation and amortization 7,188 6,941 13,973 12,932
Interest income 2,350 3,051 5,803 5,036
Income (loss) from continuing
operations before income tax
provision 11,501 6,473 (8,730) 7,418
Income tax provision 5,149 1,332 8,253 1,542
Income (loss) from continuing
operations 6,352 5,141 (16,983) 5,876
Income from discontinued
operations, net of tax - 249 - 220
Net income (loss) $6,352 $5,390 $(16,983) $6,096
Basic income (loss) per common
share:
Income (loss) from continuing
operations $0.11 $0.09 $(0.29) $0.10
Income from discontinued
operations - - - 0.01
Net Income (loss) $0.11 $0.09 $(0.29) $0.11
Diluted income (loss) per common
share:
Income (loss) from continuing
operations $0.11 $0.09 $(0.29) $0.10
Income from discontinued
operations - - - -
Net Income (loss) $0.11 $0.09 $(0.29) $0.10
Weighted-average shares outstanding
used in computing basic and diluted
net income (loss) per common share:
Basic 57,693 57,071 57,664 57,023
Diluted 59,061 59,748 57,664 59,689
WEBMD HEALTH CORP.
CONSOLIDATED SEGMENT INFORMATION
(In thousands, except per share data, unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenue
Online Services:
Advertising and sponsorship $62,383 $52,436 $118,448 $99,857
Licensing 21,866 19,799 43,789 39,914
Content syndication and other 345 653 762 1,537
Total Online Services 84,594 72,888 162,999 141,308
Publishing and Other Services 4,582 4,382 7,859 7,906
$89,176 $77,270 $170,858 $149,214
Earnings before interest, taxes,
depreciation, amortization and
other non-cash items ('Adjusted
EBITDA') (a)
Online Services $18,800 $14,042 $35,331 $27,034
Publishing and Other Services 1,027 863 273 505
19,827 14,905 35,604 27,539
Adjusted EBITDA per basic
common share $0.34 $0.26 $0.62 $0.48
Adjusted EBITDA per diluted
common share (b) $0.34 $0.25 $0.60 $0.46
Interest, taxes, depreciation,
amortization and other non-cash
items (c)
Interest income 2,350 3,051 5,803 5,036
Depreciation and amortization (7,188) (6,941) (13,973) (12,932)
Non-cash advertising - - (1,558) (2,320)
Non-cash stock-based compensation (3,488) (4,542) (7,200) (9,905)
Impairment of auction rate
securities investments - - (27,406) -
Income tax provision (5,149) (1,332) (8,253) (1,542)
Income (loss) from continuing
operations 6,352 5,141 (16,983) 5,876
Income from discontinued
operations, net of tax - 249 - 220
Net income (loss) $6,352 $5,390 $(16,983) $6,096
Basic income (loss) per common
share:
Income (loss) from continuing
operations $0.11 $0.09 $(0.29) $0.10
Income from discontinued
operations - - - 0.01
Net income (loss) $0.11 $0.09 $(0.29) $0.11
Diluted income (loss) per common
share:
Income (loss) from continuing
operations $0.11 $0.09 $(0.29) $0.10
Income from discontinued
operations - - - -
Net income (loss) $0.11 $0.09 $(0.29) $0.10
Weighted-average shares outstanding
used in computing basic and diluted
net income (loss) per common share:
Basic 57,693 57,071 57,664 57,023
Diluted 59,061 59,748 57,664 59,689
(a) See Annex A - Explanation of Non-GAAP Financial Measures
(b) Six months ended June 30, 2008 Adjusted EBITDA per share is
calculated based on 59,103 diluted shares
(c) Reconciliation of Adjusted EBITDA to income (loss) from continuing
operations
WEBMD HEALTH CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
June 30, December 31,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $186,490 $213,753
Short-term investments 138,753 80,900
Accounts receivable, net 68,865 86,081
Current portion of prepaid advertising 2,275 2,329
Due from HLTH - 1,153
Other current assets 9,259 10,840
Total current assets 405,642 395,056
Property and equipment, net 46,554 48,589
Prepaid advertising 3,017 4,521
Goodwill 221,281 221,429
Intangible assets, net 31,323 36,314
Other assets 7,317 12,955
$715,134 $718,864
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $20,203 $26,498
Deferred revenue 87,401 76,401
Due to HLTH 72 -
Total current liabilities 107,676 102,899
Other long-term liabilities 8,890 9,210
Stockholders' equity 598,568 606,755
$715,134 $718,864
WEBMD HEALTH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Six Months Ended
June 30,
2008 2007
Cash flows from operating activities:
Net (loss) income $(16,983) $6,096
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Income from discontinued
operations, net of tax - (220)
Depreciation and amortization 13,973 12,932
Non-cash advertising 1,558 2,320
Non-cash stock-based compensation 7,200 9,905
Deferred income taxes 6,667 577
Impairment of auction rate securities 27,406 -
Changes in operating assets and
liabilities:
Accounts receivable 17,216 7,719
Other assets (1,394) 74
Accrued expenses and other
long-term liabilities (5,131) (7,271)
Due to HLTH 1,246 2,136
Deferred revenue 11,000 10,576
Net cash provided by
continuing operations 62,758 44,844
Net cash provided by
discontinued operations - 48
Net cash provided by
operating activities 62,758 44,892
Cash flows from investing activities:
Proceeds from maturities and sales
of available-for-sale securities 41,300 95,256
Purchases of available-for-sale
securities (127,900) (112,667)
Purchases of property and equipment (6,946) (9,764)
Cash received from sale of
business and business
combinations, net of fees 1,133 -
Net cash used in
investing activities (92,413) (27,175)
Cash flows from financing activities:
Proceeds from issuance of common stock 2,392 5,723
Net cash transfers with HLTH - 145,257
Net cash provided by
financing activities 2,392 150,980
Net (decrease) increase in cash and
cash equivalents (27,263) 168,697
Cash and cash equivalents at
beginning of period 213,753 44,660
Cash and cash equivalents at end of
period $186,490 $213,357
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,
depreciation, amortization and other non-cash 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, 'income (loss) from
continuing operations' calculated in accordance with GAAP. The tables
attached to the accompanying press release include reconciliations of 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 income
(loss) from continuing operations or net income (loss). 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 income
(loss) from continuing operations or net income (loss), 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 income (loss) from
continuing operations or to net income (loss) that accompany our press
releases containing non-GAAP financial measures, including the reconciliations
contained in the tables 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 income (loss) from continuing
operations or to net income (loss), 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 'income (loss) from continuing operations' or 'net income
(loss)' 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 WebMD from
Adjusted EBITDA but included in 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. 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. Stock-based compensation expenses included in the
Statement of Operations are summarized as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Non-cash stock-based compensation
included in:
Cost of operations $(826) $(984) $(1,945) $(2,562)
Sales and marketing $(1,264) $(1,379) $(2,402) $(2,637)
General and administrative $(1,398) $(2,179) $(2,853) $(4,706)
-- 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 2009. 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. Non-cash advertising expenses included in the Consolidated
Statement of Operations in Sales and Marketing expense were $1,558 and $2,320
for the six months ended June 30, 2008 and 2007, respectively. There were no
non-cash advertising expenses for the three months ended June 30, 2008 and
2007.
-- 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 it is not directly attributable to the 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 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 $270,000 as of the year ended December 31, 2007.
WebMD maintained a full valuation allowance on these NOL carryforwards until
the fourth quarter of 2007, at which time a portion of the valuation allowance
was reversed after consideration of the relevant factors. The related
valuation allowances are either reversed through the income statement,
additional paid-in capital, or reversed to goodwill, to the extent those tax
benefits were acquired through business combinations. The timing of such
reversals has not been 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.
-- Other Items. WebMD engages in other activities and transactions that
can impact WebMD's overall income (loss) from continuing operations. WebMD
excludes these other items from Adjusted EBITDA when it believes these
activities or transactions 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. Investors should note that these other items may recur in future
periods. In the accompanying press release and financial tables, WebMD has
excluded loss on the impairment of auction rate securities from Adjusted
EBITDA.
SOURCE WebMD Health Corp.
