2014

WebMD Announces Second Quarter Financial Results

NEW YORK, July 31, 2012 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the three months ended June 30, 2012.

For the three months ended June 30, 2012:

  • Revenue was $112.7 million, compared to $141.4 million in the prior year period. Public portal advertising and sponsorship revenue was $93.7 million, compared to $121.1 million in the prior year period. Private portal services revenue was $18.9 million, compared to $20.3 million in the prior year period.
  • Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") was $14.2 million, compared to $45.3 million in the prior year period.
  • Net loss was $(5.6) million or $(0.11) per diluted share, compared to net income of $21.6 million or $0.36 per diluted share in the prior year period. Net loss in the current period includes an after-tax expense of $0.8 million related to recruitment of the Company's CEO and after-tax income from discontinued operations of $0.5 million. Net income in the prior year period includes an after-tax gain on investments of $1.0 million and after-tax income from discontinued operations of $7.4 million.

Traffic Highlights
Traffic to the WebMD Health Network during the second quarter continued to grow, reaching an average of 106.9 million unique users per month and 2.50 billion page views for the quarter, increases of 29% and 25%, respectively, from the prior year period.  The prior year comparisons exclude traffic from WebMD's former affiliate partner sites, which were phased out at the end of 2011.

Balance Sheet Highlights
As of June 30, 2012, WebMD had $964 million in cash and cash equivalents and $800 million in aggregate principal amount of convertible notes outstanding. During the second quarter, the Company utilized $150 million of cash to purchase 5.8 million shares of its common stock in a tender offer. Additionally, during the quarter, the Company utilized $22.8 million of cash to purchase approximately 1 million shares of its common stock under its buyback program.

Financial Guidance
On July 24, 2012, the Company reduced its financial guidance for 2012. A copy of the schedule issued on July 24th outlining WebMD's 2012 financial guidance is attached to this press release. The Company anticipates that many of its customers will continue to reevaluate expenditures in various areas, including marketing expenditures across their entire product portfolios, as they deal with both the ongoing and anticipated impact of patent expirations across their businesses as well as greater than expected delays in new product launches as a result of unanticipated delays in FDA approvals. The Company lowered its expectations for sales commitments and revenue for the balance of 2012 as these factors are having a greater impact than anticipated in its previous financial guidance.

"When I look at the many stakeholders in the healthcare industry and the changing market environment, I strongly believe that there are many opportunities we can capitalize on with the WebMD brand and the broad reach and high quality of WebMD's unique physician and consumer audience," said Cavan M. Redmond, Chief Executive Officer of WebMD. "My immediate priority is to set and operationalize our go-to-market strategy focusing on our current and future commercial offerings, capital allocation, talent needs and cost structure."

Analyst and Investor Conference Call
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.

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 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 conduct our strategic review and to implement resulting 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. 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


Six Months Ended








June 30,


June 30,








2012


2011


2012


2011
















Revenue


$       112,668


$         141,369


$       219,615


$       272,978


Cost of operations


54,243


51,152


107,714


99,601


Sales and marketing


31,822


32,270


61,925


64,564


General and administrative


21,746


22,006


50,768


44,827


Depreciation and amortization


6,713


6,724


13,643


13,148


Interest income


34


51


45


67


Interest expense


5,832


5,833


11,668


8,974


Gain on investments


-


1,769


8,074


15,829


Other expense


1,097


-


2,297


53


(Loss) income from continuing operations before income










      tax (benefit) provision


(8,751)


25,204


(20,281)


57,707


      Income tax (benefit) provision


(2,649)


11,003


(6,402)


23,961


(Loss) income from continuing operations


(6,102)


14,201


(13,879)


33,746


      Income from discontinued operations, net of tax


508


7,394


508


7,394


Net (loss) income


$          (5,594)


$           21,595


$        (13,371)


$         41,140













Basic (loss) income per common share:










      (Loss) income from continuing operations


$            (0.12)


$               0.24


$            (0.26)


$             0.58


      Income from discontinued operations


0.01


0.13


0.01


0.12


Net (loss) income


$            (0.11)


$               0.37


$            (0.25)


$             0.70













Diluted (loss) income per common share:










      (Loss) income from continuing operations


$            (0.12)


$               0.23


$            (0.26)


$             0.55


      Income from discontinued operations


0.01


0.13


0.01


0.13


Net (loss) income


$            (0.11)


$               0.36


$            (0.25)


$             0.68













Weighted-average shares outstanding used in 










      computing (loss) income per common share:










      Basic


49,615


58,096


52,692


58,140


      Diluted 


49,615


60,236


52,692


60,473













WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

 (In thousands, unaudited)



























Three Months Ended


Six Months Ended






June 30,


June 30,






2012


2011


2012


2011


Revenue











Public portal advertising and sponsorship


$        93,744


$      121,108


$      181,520


$      231,471



Private portal services


18,924


20,261


38,095


41,507






$      112,668


$      141,369


$      219,615


$      272,978














Earnings before interest, taxes, non-cash











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


$        14,238


$        45,289


$        25,489


$        83,147














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











Interest income


34


51


45


67



Interest expense


(5,832)


(5,833)


(11,668)


(8,974)



Income tax benefit (provision)


2,649


(11,003)


6,402


(23,961)



Depreciation and amortization 


(6,713)


(6,724)


(13,643)


(13,148)



Non-cash stock-based compensation


(9,381)


(9,348)


(26,281)


(19,161)



Gain on investments


-


1,769


8,074


15,829



Other expense


(1,097)


-


(2,297)


(53)


(Loss) income from continuing operations


(6,102)


14,201


(13,879)


33,746



 Income from discontinued operations, net of tax 


508


7,394


508


7,394


 Net (loss) income 


$        (5,594)


$        21,595


$      (13,371)


$        41,140














(a)

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


(b)

Reconciliation of Adjusted EBITDA to net (loss) income.














WEBMD HEALTH CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (In thousands, unaudited)
















June 30, 2012


December 31, 2011

Assets





Cash and cash equivalents


$                 964,226


$                    1,121,217

Accounts receivable, net


96,834


121,335

Prepaid expenses and other current assets


16,933


12,690

Deferred tax assets


21,872


20,482

        Total current assets


1,099,865


1,275,724







Property and equipment,  net


65,193


57,139

Goodwill


202,104


202,104

Intangible assets, net


18,686


19,999

Deferred tax assets


52,816


55,017

Other assets


28,875


31,042

Total Assets


$              1,467,539


$                    1,641,025







Liabilities and Stockholders' Equity





Accrued expenses


$                   49,322


$                         55,238

Deferred revenue


89,285


88,055

Liabilities of discontinued operations


1,506


1,506

      Total current liabilities


140,113


144,799







2.25% convertible notes due 2016


400,000


400,000

2.50% convertible notes due 2018


400,000


400,000

Other long-term liabilities


22,942


21,790







Stockholders' equity


504,484


674,436







Total Liabilities and Stockholders' Equity


$              1,467,539


$                    1,641,025







WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)























Six Months Ended







June 30,







2012


2011

Cash flows from operating activities:






Net (loss) income 


$         (13,371)


$        41,140


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






  operating activities:







Income from discontinued operations, net of tax


(508)


(7,394)



Depreciation and amortization


13,643


13,148



Non-cash interest, net


2,163


1,599



Non-cash stock-based compensation


26,281


19,161



Deferred income taxes


(6,870)


4,423



Gain on investments


(8,074)


(15,829)



Changes in operating assets and liabilities:








Accounts receivable


24,501


19,234




Prepaid expenses and other, net


(4,469)


(2,103)




Accrued expenses and other long-term liabilities


(9,128)


4,765




Deferred revenue


1,230


(1,044)





Net cash provided by continuing operations


25,398


77,100





Net cash used in discontinued operations


-


(136)





Net cash provided by operating activities


25,398


76,964










Cash flows from investing activities:






Proceeds received from ARS option


9,269


16,561


Purchases of property and equipment


(16,606)


(9,557)





Net cash (used in) provided by investing activities


(7,337)


7,004










Cash flows from financing activities:






Proceeds from exercise of stock options


816


25,053


Cash used for withholding taxes due on stock-based awards


(1,958)


(6,632)


Net proceeds from issuance of the 2.50% Notes and 2.25% Notes


-


774,745


Purchases of treasury stock 


(173,910)


(150,417)


Excess tax benefit on stock-based awards


-


17,843





Net cash (used in) provided by financing activities


(175,052)


660,592

Net (decrease) increase in cash and cash equivalents


(156,991)


744,560

Cash and cash equivalents at beginning of period


1,121,217


400,501

Cash and cash equivalents at end of period


$         964,226


$   1,145,061










WebMD Health Corp.

Financial Guidance for the Year Ending December 31, 2012

(in millions, except per share amounts)














Year Ending




December 31, 2012




Guidance Range







Revenue


$           455.0


$           480.0













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


$             60.0


$             75.0







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






Interest expense


(23.2)


(23.2)


Depreciation and amortization


(28.0)


(27.0)


Non-cash stock-based compensation


(48.0)


(46.0)


Gain on investments


8.1


8.1


Other expense


(2.3)


(2.3)

Pre-tax loss from continuing operations


(33.4)


(15.4)







Income tax benefit


10.0


3.0







Loss from continuing operations


(23.4)


(12.4)







Income from discontinued operations, net of tax


0.5


0.5







Net loss


$            (22.9)


$            (11.9)













Loss from continuing operations per share:





   Basic and diluted


$            (0.45)


$            (0.24)







Net loss per share:





   Basic and diluted


$            (0.44)


$            (0.23)







Weighted-average shares outstanding used in computing
per share amounts:





   Basic and diluted


52.0


52.0













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







(b) Reconciliation of Adjusted EBITDA to income from continuing operations







Additional information regarding forecast for the quarter ending September 30, 2012: 

     -     Revenue is forecasted to be between $115 million to $120 million

     -     Adjusted EBITDA as a percentage of revenue is forecasted to be approximately 13% to 15%

     -     Loss from continuing operations as a percentage of revenue is forecasted to be approximately 3% to 5%







Additional information regarding full year forecast: 





     -    The distribution of the annual revenue is expected to be approximately 83% public portals advertising and 
          sponsorship and
17% private portal licensing.  Quarterly revenue distributions may vary from this annual 
          estimate

     -    2012 guidance includes actual gains on investments and income from discontinued operations during the six 
          months ended
June 30, 2012 but excludes any estimate for these items during the six months ending 
          December 31, 2012

     -    Convertible notes are not expected to be dilutive for the full year or any quarter







 

 

ANNEX A

Explanation of Non-GAAP Financial Measures
(All dollar amounts in thousands)

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: income or loss from continuing operations calculated in accordance with GAAP (referred to below as "income from continuing operations"); or net income or loss calculated in accordance with GAAP (referred to below as "net income"). 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 income from continuing operations or net income. 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 income from continuing operations or 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 income from continuing operations or to net income 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 income from continuing operations or to net income, 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 income from continuing operations or net income. 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 income from continuing operations and 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. 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 our company's 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 company'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 Consolidated Statement of Operations are summarized as follows:





Three Months Ended


Six Months Ended






June 30,


June 30,






2012

2011


2012

2011








Non-cash stock-based compensation included in:







Cost of operations


$ 1,873

$ 1,856


$ 4,630

$ 3,959


Sales and marketing


$ 2,304

$ 2,188


$ 4,465

$ 4,579


General and administrative


$ 5,204

$ 5,304


$ 17,186

$ 10,623












  • 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 regarding the components of interest expense of our convertible notes:





Three Months Ended


Six Months Ended






June 30,


June 30,






2012

2011


2012

2011








Non-cash interest expense







2.50% Convertible Notes


$ 452

$ 452


$ 904

$ 849


2.25% Convertible Notes


$ 629

$ 631


$ 1,259

$ 750

Cash interest expense








2.50% Convertible Notes


$ 2,500

$ 2,500


$ 5,000

$ 4,694


2.25% Convertible Notes


$ 2,250

$ 2,250


$ 4,500

$ 2,675












  • 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 income from continuing operations and net income. In recent periods, these other items have included, but were not limited to, (i) legal expenses relating to the Department of Justice investigation, (ii) a reduction of certain sales and use tax contingencies resulting from the expiration of certain applicable statutes of limitations, (iii) gain or loss on investments, and (iv) legal fees and other expenses incurred in connection with the process conducted by our Board of Directors to explore strategic alternatives for our company. 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.

 

SOURCE WebMD Health Corp.



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