Total Revenue Increased 17%; Advertising Revenue Increased 22%
WebMD Leads Online Health Information Sector with 49.9 Million Unique Monthly Users, Up 22% and 1.14 Billion Quarterly Page Views, Up 33%
"Our third quarter results demonstrate that WebMD's position as the leading source of health information for consumers and health care professionals continues to be recognized by advertisers and sponsors, who value our high quality audience and the highly differentiated products and services that we provide," said
Financial Summary
WebMD's third quarter financial results are consistent with the Company's previously issued financial guidance. Revenue for the third quarter was
Income from continuing operations and net income for the third quarter was
WebMD had approximately
Segment Operating Highlights
Online Services segment revenue was
Traffic to the WebMD Health Network continued to grow strongly with an average of 49.9 million unique users per month and total traffic of 1.14 billion page views during the third quarter, increases of 22% and 33%, respectively, from a year ago. In the third quarter, 1.3 million continuing medical education (CME) programs were completed on the WebMD Professional Network, an increase of 76% from the prior year period.
The base of large employers and health plans utilizing WebMD's private Health and Benefits portals during the third quarter was 129 as compared to 112 a year ago. During the quarter, WebMD significantly expanded its relationship with Wal-Mart Stores, Inc. and added Tyco International Management Company, Viacom, Inc., Presbyterian Health Plan, Inc. and
Publishing and Other Services segment revenue was
Financial Guidance
WebMD expects revenue and Adjusted EBITDA for the fourth quarter of 2008 to be
WebMD issued preliminary financial guidance for 2009 today. WebMD expects 2009 revenue to be
Additional detail is provided in a schedule attached to this release as well as in a Form 8-K filed today.
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
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.
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: 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; and expectations regarding the market for WebMD's 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 WebMD's products and services; WebMD's 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
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 Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Revenue $100,387 $86,098 $271,245 $235,312 Costs and expenses: Cost of operations 35,323 30,021 99,656 87,636 Sales and marketing 26,439 22,459 77,729 67,258 General and administrative 15,209 15,388 43,599 46,874 Impairment of auction rate securities - - 27,406 - Depreciation and amortization 7,133 7,085 21,106 20,017 Interest income 2,616 3,486 8,419 8,522 Income from continuing operations before income tax provision 18,899 14,631 10,169 22,049 Income tax provision 8,133 3,129 16,385 4,671 Income (loss) from continuing operations 10,766 11,502 (6,217) 17,378 (Loss) income from discontinued operations, net of tax - (10) - 210 Net income (loss) $10,766 $11,492 $(6,217) $17,588 Basic income (loss) per common share: Income (loss) from continuing operations $0.19 $0.20 $(0.11) $0.30 (Loss) income from discontinued operations - (0.00) - 0.01 Net income (loss) $0.19 $0.20 $(0.11) $0.31 Diluted income (loss) per common share: Income (loss) from continuing operations $0.18 $0.19 $(0.11) $0.29 (Loss) income from discontinued operations - (0.00) - 0.00 Net income (loss) $0.18 $0.19 $(0.11) $0.29 Weighted-average shares outstanding used in computing basic and diluted net income (loss) per common share: Basic 57,770 57,154 57,699 57,067 Diluted 59,111 59,848 57,699 59,742 WEBMD HEALTH CORP. CONSOLIDATED SEGMENT INFORMATION (In thousands, except per share data, unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Revenue Online Services: Advertising and sponsorship $72,046 $59,087 $190,494 $158,944 Licensing 22,139 20,001 65,928 59,915 Content syndication and other 392 490 1,154 2,027 Total Online Services 94,577 79,578 257,576 220,886 Publishing and Other Services 5,810 6,520 13,669 14,426 $100,387 $86,098 $271,245 $235,312 Earnings before interest, taxes, depreciation, amortization and other non-cash items ("Adjusted EBITDA") (a) Online Services $25,956 $21,948 $61,287 $48,982 Publishing and Other Services 1,212 2,138 1,485 2,643 27,168 24,086 62,772 51,625 Adjusted EBITDA per basic common share $0.47 $0.42 $1.09 $0.90 Adjusted EBITDA per diluted common share (b) $0.46 $0.40 $1.06 $0.86 Interest, taxes, depreciation, amortization and other non-cash items (c) Interest income 2,616 3,486 8,419 8,522 Depreciation and amortization (7,133) (7,085) (21,106) (20,017) Non-cash advertising (178) (169) (1,736) (2,489) Non-cash stock-based compensation (3,574) (5,687) (10,774) (15,592) Impairment of auction rate securities - - (27,406) - Income tax provision (8,133) (3,129) (16,385) (4,671) Income (loss) from continuing operations 10,766 11,502 (6,217) 17,378 (Loss) income from discontinued operations, net of tax - (10) - 210 Net income (loss) $10,766 $11,492 $(6,217) $17,588 Basic income (loss) per common share: Income (loss) from continuing operations $0.19 $0.20 $(0.11) $0.30 (Loss) income from discontinued operations - (0.00) - 0.01 Net income (loss) $0.19 $0.20 $(0.11) $0.31 Diluted income (loss) per common share: Income (loss) from continuing operations $0.18 $0.19 $(0.11) $0.29 (Loss) income from discontinued operations - (0.00) - 0.00 Net income (loss) $0.18 $0.19 $(0.11) $0.29 Weighted-average shares outstanding used in computing basic and diluted net income (loss) per common share: Basic 57,770 57,154 57,699 57,067 Diluted 59,111 59,848 57,699 59,742 (a) See Annex A - Explanation of Non-GAAP Financial Measures (b) Nine months ended September 30, 2008 Adjusted EBITDA per share is calculated based on 59,106 diluted shares (c) Reconciliation of Adjusted EBITDA to income (loss) from continuing operations WEBMD HEALTH CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, unaudited) September 30, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $199,752 $213,753 Short-term investments 132,848 80,900 Accounts receivable, net 78,148 86,081 Current portion of prepaid advertising 5,114 2,329 Due from HLTH 611 1,153 Other current assets 9,602 10,840 Total current assets 426,075 395,056 Property and equipment, net 49,935 48,589 Prepaid advertising - 4,521 Goodwill 221,281 221,429 Intangible assets, net 28,917 36,314 Other assets 1,184 12,955 $727,392 $718,864 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued expenses $26,442 $26,498 Deferred revenue 81,740 76,401 Total current liabilities 108,182 102,899 Other long-term liabilities 8,719 9,210 Stockholders' equity 610,491 606,755 $727,392 $718,864 WEBMD HEALTH CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Nine Months Ended September 30, 2008 2007 Cash flows from operating activities: Net (loss) income $(6,217) $17,588 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Income from discontinued operations, net of tax - (210) Depreciation and amortization 21,106 20,017 Non-cash advertising 1,736 2,489 Non-cash stock-based compensation 10,774 15,592 Deferred income taxes 13,769 1,975 Impairment of auction rate securities 27,406 - Changes in operating assets and liabilities: Accounts receivable 7,932 14,648 Other assets (1,251) (303) Accrued expenses and other long-term liabilities (406) (7,463) Due to/from HLTH 563 5,223 Deferred revenue 5,340 3,253 Net cash provided by continuing operations 80,752 72,809 Net cash used by discontinued operations - (35) Net cash provided by operating activities 80,752 72,774 Cash flows from investing activities: Proceeds from maturities and sales of available-for-sale securities 43,300 123,885 Purchases of available-for-sale securities (127,900) (214,295) Purchases of property and equipment (15,054) (13,574) Cash received from sale of business and business combinations, net of fees 1,133 - Net cash used in investing activities (98,521) (103,984) Cash flows from financing activities: Proceeds from issuance of common stock 3,453 8,490 Tax benefit on stock-based awards 315 655 Net cash transfers with HLTH - 155,119 Net cash provided by financing activities 3,768 164,264 Net (decrease) increase in cash and cash equivalents (14,001) 133,054 Cash and cash equivalents at beginning of period 213,753 44,660 Cash and cash equivalents at end of period $199,752 $177,714
FINANCIAL GUIDANCE SUMMARY 2008 Financial Guidance (in millions, except per share amounts) Nine Months Quarter Year Ended Ended Ended September 30, December 31, December 31, 2008 2008 2008 Actual Range (d) Range (d) Revenue $271.2 $104.0 $108.0 $375.2 $379.2 Earnings before interest, taxes, depreciation, amortization and other non-cash items ("Adjusted EBITDA") (a) 62.8 30.0 32.0 $92.8 94.8 Adjusted EBITDA per diluted common share $1.06 $0.50 $0.53 $1.56 $1.59 Interest, taxes, depreciation, amortization and other non-cash items (b) Interest income 8.4 2.2 2.4 10.6 10.8 Depreciation and amortization (21.1) (7.6) (7.3) (28.7) (28.4) Non-cash advertising (1.7) (3.0) (3.0) (4.7) (4.7) Non-cash stock-based compensation (10.8) (4.5) (4.0) (15.3) (14.8) Impairment of auction rate securities (27.4) - - (27.4) (27.4) Income tax provision (16.4) (7.4) (8.6) (23.7) (25.0) Income from continuing operations and net income $(6.2) $9.7 $11.5 $3.6 $5.3 Income from continuing operations and net income per common share: Basic $(0.11) $0.17 $0.20 $0.06 $0.09 Diluted $(0.11) $0.16 $0.19 $0.06 $0.09 Weighted-average shares outstanding used in computing income from continuing operations and net income per common share: Basic 57.7 58.5 58.5 57.9 57.9 Diluted 57.7 60.5 60.5 59.4 59.4 (a) See Annex A - Explanation of Non-GAAP Financial Measures (b) Reconciliation of Adjusted EBITDA to net income (c) Income tax rate for Q4'08 is estimated to be approximately 43% of pretax income. The income tax provision excludes any benefit relating to any reversal in 2008 of the valuation allowance against deferred tax assets. (d) Excludes the impact of the pending acquisition of Marketing Technology Solutions, Inc. FINANCIAL GUIDANCE SUMMARY 2009 Preliminary Financial Guidance (in millions, except per share amounts) Year Ended December 31, 2009 Range (d) Revenue $420.0 $450.0 Earnings before interest, taxes, depreciation, amortization and other non-cash items ("Adjusted EBITDA") (a) $107.0 122.0 Adjusted EBITDA per diluted common share $1.73 $1.97 Interest, taxes, depreciation, amortization and other non-cash items (b) Interest income 8.0 10.0 Depreciation and amortization (33.0) (30.0) Non-cash advertising (1.5) (1.5) Non-cash stock-based compensation (28.0) (25.0) Income tax provision (22.6) (32.5) Income from continuing operations and net income $29.9 $43.0 Income from continuing operations and net income per common share: Basic $0.51 $0.73 Diluted $0.48 $0.69 Weighted-average shares outstanding used in computing income from continuing operations and net income per common share: Basic 59.0 59.0 Diluted 62.0 62.0 (a) See Annex A - Explanation of Non-GAAP Financial Measures (b) Reconciliation of Adjusted EBITDA to net income (c) Income tax rate for 2009 is estimated to be approximately 43% of pretax income. The income tax provision excludes any benefit relating to any reversal in 2009 of the valuation allowance against deferred tax assets. (d) Excludes the impact of the pending acquisition of Marketing Technology Solutions, Inc.
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" or "net income (loss)" 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 in the accompanying press release:
-- 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 Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Non-cash stock-based compensation included in: Cost of operations $(1,004) $(1,597) $(2,949) $(4,159) Sales and marketing $(1,222) $(1,252) $(3,624) $(3,889) General and administrative $(1,348) $(2,838) $(4,201) $(7,544)
-- 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 $178 and $169 for the three months ended September 30, 2008 and 2007, respectively, and $1,736 and $2,489 for the nine months ended September 30, 2008 and 2007, respectively.
-- 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.
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