WebMD Announces Second Quarter Financial Results

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NEW YORK, July 31, 2013 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the three months ended June 30, 2013.

"We are pleased to report strong second quarter results and reaffirm our increased revenue and earnings expectations for the balance of 2013," said David J. Schlanger, Interim CEO, WebMD. "WebMD's market leadership is demonstrated by our ability to meet the demands of consumers and physicians with health information and tools tailored to their specific interests at the right time on the right screen through our websites, mobile optimized sites and apps." 

Financial Highlights 
For the three months ended June 30, 2013:

Revenue was $125.3 million, compared to $112.7 million in the prior year period, an increase of 11%. Public portal advertising and sponsorship revenue was $105.8 million, compared to $93.7 million in the prior year period. Private portal services revenue was $19.5 million, compared to $18.9 million in the prior year period.

Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") increased 105% to $29.2 million, or 23.3% of revenue, compared to $14.2 million, or 12.6% of revenue, in the prior year period. 

Net income was $2.6 million, or $0.05 per diluted share, compared to a net loss of $(5.6) million, or $(0.11) per diluted share, in the prior year period.

These results are consistent with the preliminary release issued by the Company on July 12, 2013.

Balance Sheet Highlights 
As of June 30, 2013, WebMD had approximately $1 billion in cash and cash equivalents and $800 million in aggregate principal amount of convertible notes outstanding.

Traffic Highlights 
Traffic to the WebMD Health Network during the second quarter reached an average of 125.5 million unique users per month and total traffic of 2.64 billion page views for the quarter, increases of 17% and 6%, respectively, from the prior year period. 

Increased 2013 Financial Guidance Reaffirmed 
WebMD reaffirmed its 2013 financial guidance which it increased on July 12, 2013 in conjunction with the announcement of its preliminary second quarter financial results.

Continued

David J. Schlanger said, "We are continuing to see momentum in our public portals advertising business, particularly with our biopharmaceutical customers. We are well positioned to take advantage of the opportunities ahead of us."

The Company's reaffirmed financial guidance is summarized as follows:

WebMD expects the following for 2013:

Revenue of $485 million to $505 million, an increase of 3% to 7% from the prior year.

Adjusted EBITDA of $100 million to $110 million, an increase of 37% to 50% from the prior year.

Net income of $3 million to $11 million. Net loss in the prior year was $(20.3) million.

WebMD expects 2013 revenue distribution to be:

Approximately 83% from public portals advertising and sponsorship, representing growth of approximately 3% to 7% over the prior year, and

Approximately 17% from private portal licensing, representing growth of approximately 5% to 9% over the prior year.

WebMD's reaffirmed guidance reflects: (a) actual results for the first half of 2013; (b) visibility for the second half of 2013 based upon several factors, including orders received to date and those expected over the balance of the year; and (c) anticipated expenses relating to new private portal customer implementations as well as public portal initiatives such as enhanced data and analytics and new content and enhanced offerings for both users and advertisers.

For the third quarter of 2013, WebMD expects:

Revenue to be in excess of $128 million;

Adjusted EBITDA to be in excess of 22% of revenue; and

Net income to be approximately 3% of revenue.

A schedule summarizing the Company's current financial guidance is attached to this press release. 

Termination of Stockholder Rights Plan 
The Board of Directors has approved the termination of WebMD's Stockholder Rights Plan. The Board believes the Rights Plan, which was first adopted in November 2011, has served its purpose during what was a challenging period for the Company and has determined that it is not necessary to continue the Rights Plan at this time.  The termination of the Rights Plan is expected to be completed within the next week.  WebMD's Board of Directors may, in the future, adopt a new rights agreement or comparable plan if, in the exercise of its fiduciary duties, it determines that such adoption is in the best interests of WebMD and its stockholders. 

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.

Continued

The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, eMedicineHealth, RxList, theheart.org, Medscape Education and other owned WebMD sites.

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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 expected contracts with customers, 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 implement 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 and this press release is intended to be read in conjunction with those 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.

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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. 

Continued

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WebMD®, Medscape®, CME Circle®, Medpulse®, eMedicine®, MedicineNet®, theheart.org® and RxList® are among the 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,

 
       

2013

 

2012

 

2013

 

2012

 
                       

Revenue

 

$       125,317

 

$         112,668

 

$       238,079

 

$       219,615

 

Cost of operations

 

51,596

 

54,243

 

98,539

 

107,714

 

Sales and marketing

 

31,422

 

31,822

 

62,355

 

61,925

 

General and administrative

 

24,282

 

21,746

 

47,816

 

50,768

 

Depreciation and amortization

 

6,635

 

6,713

 

13,488

 

13,643

 

Interest income

 

17

 

34

 

38

 

45

 

Interest expense

 

5,832

 

5,832

 

11,664

 

11,668

 

Gain on investments

 

-

 

-

 

-

 

8,074

 

Other expense

 

1,353

 

1,097

 

1,353

 

2,297

 

Income (loss) from continuing operations before income

               
 

tax provision (benefit)

 

4,214

 

(8,751)

 

2,902

 

(20,281)

 
 

Income tax provision (benefit)

 

1,603

 

(2,649)

 

1,829

 

(6,402)

 

Income (loss) from continuing operations

 

2,611

 

(6,102)

 

1,073

 

(13,879)

 
 

Income from discontinued operations, net of tax

 

-

 

508

 

-

 

508

 

Net income (loss)

 

$           2,611

 

$           (5,594)

 

$           1,073

 

$        (13,371)

 
                       

Basic income (loss) per common share:

                 
 

Income (loss) from continuing operations

 

$             0.05

 

$             (0.12)

 

$             0.02

 

$            (0.26)

 
 

Income from discontinued operations

 

-

 

0.01

 

-

 

0.01

 

Net income (loss)

 

$             0.05

 

$             (0.11)

 

$             0.02

 

$            (0.25)

 
                       

Diluted income (loss) per common share:

                 
 

Income (loss) from continuing operations

 

$             0.05

 

$             (0.12)

 

$             0.02

 

$            (0.26)

 
 

Income from discontinued operations

 

-

 

0.01

 

-

 

0.01

 

Net income (loss)

 

$             0.05

 

$             (0.11)

 

$             0.02

 

$            (0.25)

 
                       

Weighted-average shares outstanding used in 

                 
 

computing income (loss) per common share: 

                 
 

Basic

 

49,315

 

49,615

 

49,161

 

52,692

 
 

Diluted

 

50,925

 

49,615

 

50,175

 

52,692

 
                       

 

 

WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

 (In thousands, unaudited)

                     
                 
     

Three Months Ended

 

Six Months Ended

 
     

June 30,

 

June 30,

 
     

2013

 

2012

 

2013

 

2012

 

Revenue

                 
 

Public portal advertising and sponsorship

 

$      105,783

 

$        93,744

 

$      199,221

 

$      181,520

 
 

Private portal services

 

19,534

 

18,924

 

38,858

 

38,095

 
     

$      125,317

 

$      112,668

 

$      238,079

 

$      219,615

 
                     

Earnings before interest, taxes, non-cash

                 
 

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

 

$        29,241

 

$        14,238

 

$        50,530

 

$        25,489

 
                     

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

                 
 

Interest income

 

17

 

34

 

38

 

45

 
 

Interest expense

 

(5,832)

 

(5,832)

 

(11,664)

 

(11,668)

 
 

Income tax (provision) benefit

 

(1,603)

 

2,649

 

(1,829)

 

6,402

 
 

Depreciation and amortization 

 

(6,635)

 

(6,713)

 

(13,488)

 

(13,643)

 
 

Non-cash stock-based compensation

 

(11,224)

 

(9,381)

 

(21,161)

 

(26,281)

 
 

Gain on investments

 

-

 

-

 

-

 

8,074

 
 

Other expense

 

(1,353)

 

(1,097)

 

(1,353)

 

(2,297)

 

Income (loss) from continuing operations

 

2,611

 

(6,102)

 

1,073

 

(13,879)

 
 

 Income from discontinued operations, net of tax 

 

-

 

508

 

-

 

508

 

 Net income (loss) 

 

$          2,611

 

$        (5,594)

 

$          1,073

 

$      (13,371)

 
                     

(a)

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

 

(b)

Reconciliation of Adjusted EBITDA to net income (loss).

 
                     

Continued

 

 

WEBMD HEALTH CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (In thousands)

           
     

June 30, 2013

 

December 31, 2012

     

(unaudited)

   

Assets

       

Cash and cash equivalents

 

$              1,026,139

 

$                       991,835

Accounts receivable, net

 

103,793

 

106,622

Prepaid expenses and other current assets

 

17,520

 

13,882

Deferred tax assets

 

10,232

 

10,328

        Total current assets

 

1,157,684

 

1,122,667

           

Property and equipment,  net

 

61,223

 

66,604

Goodwill

 

202,104

 

202,104

Intangible assets, net

 

14,970

 

16,105

Deferred tax assets

 

52,711

 

56,039

Other assets

 

24,182

 

27,106

Total Assets

 

$              1,512,874

 

$                    1,490,625

           

Liabilities and Stockholders' Equity

       

Accrued expenses

 

$                   53,338

 

$                         64,256

Deferred revenue

 

98,325

 

92,176

Liabilities of discontinued operations

 

1,506

 

1,506

      Total current liabilities

 

153,169

 

157,938

           

2.25% convertible notes due 2016

 

400,000

 

400,000

2.50% convertible notes due 2018

 

400,000

 

400,000

Other long-term liabilities

 

22,498

 

22,698

           

Stockholders' equity

 

537,207

 

509,989

           

Total Liabilities and Stockholders' Equity

 

$              1,512,874

 

$                    1,490,625

           

 

 

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

                 
             
           

Six Months Ended

           

June 30,

           

2013

 

2012

Cash flows from operating activities:

       
 

Net income (loss)

 

$             1,073

 

$      (13,371)

 

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

       
 

  operating activities:

       
   

Income from discontinued operations, net of tax

 

-

 

(508)

   

Depreciation and amortization

 

13,488

 

13,643

   

Non-cash interest, net

 

2,163

 

2,163

   

Non-cash stock-based compensation

 

21,161

 

26,281

   

Deferred income taxes

 

856

 

(6,870)

   

Gain on investments

 

-

 

(8,074)

   

Changes in operating assets and liabilities:

       
     

Accounts receivable

 

2,829

 

24,501

     

Prepaid expenses and other, net

 

(3,060)

 

(4,469)

     

Accrued expenses and other long-term liabilities

 

(10,665)

 

(9,128)

     

Deferred revenue

 

6,149

 

1,230

       

Net cash provided by operating activities

 

33,994

 

25,398

                 

Cash flows from investing activities:

       
 

Proceeds received from ARS option

 

-

 

9,269

 

Purchases of property and equipment

 

(7,367)

 

(16,606)

       

Net cash used in investing activities

 

(7,367)

 

(7,337)

                 

Cash flows from financing activities:

       
 

Proceeds from exercise of stock options

 

10,340

 

816

 

Cash used for withholding taxes due on stock-based awards

 

(1,745)

 

(1,958)

 

Purchases of treasury stock 

 

(1,281)

 

(173,910)

 

Excess tax benefit on stock-based awards

 

363

 

-

       

Net cash provided by (used in) financing activities

 

7,677

 

(175,052)

Net increase (decrease) in cash and cash equivalents

 

34,304

 

(156,991)

Cash and cash equivalents at beginning of period

 

991,835

 

1,121,217

Cash and cash equivalents at end of period

 

$      1,026,139

 

$      964,226

                 

Continued

 

 

           

WebMD Health Corp.

 

Financial Guidance for the Year Ending December 31, 2013

 

(In millions, except per share amounts)

 
           
   

Guidance Range

 
           

Revenue

 

$ 485.0

 

$ 505.0

 
           

Earnings before interest, taxes, non-cash

         

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

 

$ 100.0

 

$ 110.0

 
           

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

         

Interest expense, net

 

(23.0)

 

(23.0)

 

Depreciation and amortization

 

(28.0)

 

(27.0)

 

Non-cash stock-based compensation

 

(39.0)

 

(37.0)

 

Other expense (c)

 

(1.4)

 

(1.4)

 

Pre-tax income

 

8.6

 

21.6

 
           

Income tax provision

 

(5.6)

 

(10.6)

 
           

Net income

 

$ 3.0

 

$ 11.0

 
           

Net income per share:

         

Basic

 

$ 0.06

 

$ 0.22

 

Diluted

 

$ 0.06

 

$ 0.21

 
           

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

         

Basic

 

50.0

 

50.0

 

Diluted

 

52.0

 

52.0

 
           
           

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

           

(b) Reconciliation of Adjusted EBITDA to Net Income

           

(c) Represents severance expense for the Company's former Chief Executive Officer

           

Additional information regarding forecast for the quarter ending September 30, 2013:

- Revenue is forecasted to be in excess of $128 million

- Adjusted EBITDA as a percentage of revenue is forecasted to be in excess of 22%

- Net income as a percentage of revenue is forecasted to be approximately 3%

           

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.

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

           

The above guidance does not include the impact, if any, of future deployment of capital for items such as share repurchases or acquisitions, gains or losses from discontinued operations, or other non-recurring, one-time or unusual items.

   

 

ANNEX A

Explanation of Non-GAAP Financial Measures 

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 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.  

Continued

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 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 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 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 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 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.

Continued

The following is an explanation of the items excluded by us from Adjusted EBITDA but included in 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:

Continued

 

         

Three Months Ended

 

Six Months Ended

         

June 30,

 

June 30,

         

2013

2012

 

2013

2012

             

Non-cash stock-based compensation included in:

         
 

Cost of operations

 

$    1,471

$    1,873

 

$    3,341

$    4,630

 

Sales and marketing

 

$    1,997

$    2,304

 

$    4,520

$    4,465

 

General and administrative

 

$    7,756

$    5,204

 

$  13,300

$  17,186

                     

 

Interest Income and Expense.   Interest income is associated with the level of marketable debt securities and other interest bearing accounts in which we invest, and interest expense is related to 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,

         

2013

2012

 

2013

2012

             

Non-cash interest expense

         
 

2.50% Convertible Notes

 

$         452

$       452

 

$       904

$       904

 

2.25% Convertible Notes

 

$         629

$       629

 

$    1,259

$    1,259

 

Cash interest expense

           
 

2.50% Convertible Notes

 

$     2,500

$   2,500

 

$    5,000

$    5,000

 

2.25% Convertible Notes

 

$     2,250

$   2,250

 

$    4,500

$    4,500

                     

 

  • 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 adjusted through the statement of operations or additional paid-in capital. The timing of such adjustments 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 net income. In recent periods, these other items have included, but were not limited to: (i) gain or loss on investments; (ii) a restructuring charge; and (iii) severance expense. 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.

Continued

 

 

SOURCE WebMD Health Corp.

 

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