WebMD Announces Third Quarter Financial Results

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NEW YORK, Nov. 3, 2015 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the three months ended September 30, 2015.

"We are pleased to report third quarter results that are above the high end of our financial guidance," said David Schlanger, Chief Executive Officer, WebMD. "With a significant backlog and positive sales momentum, we are reaffirming our 2015 outlook today. We expect to deliver in the fourth quarter the largest quarter in the Company's history. The environment remains strong and we are well positioned to continue to grow revenue and further strengthen our market leadership."  

Financial Highlights 
For the three months ended September 30, 2015:

  • Revenue was $152.6 million, compared to $143.5 million in the prior year period, an increase of 6%. Advertising and sponsorship revenue was $118.7 millioncompared to $112.5 million in the prior year period. Private portal services revenue was $27.5 million compared to $25.8 million in the prior year period.  Information services revenue was $6.4 million compared to $5.2 million in the prior year period.
  • Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") was $46.4 million, compared to $39.3 million in the prior year period, an increase of 18%.  
  • Net income was $13.2 million or $0.32 per diluted share, compared to $9.8 million, or $0.23 per diluted share in the prior year period. Net income would have been $14.4 million, or $0.34 per diluted share, excluding an after-tax loss on convertible notes of $(1.2) million.

Traffic Highlights
Traffic to the WebMD Health Network during the third quarter reached an average of 206 million unique users per month generating 4.00 billion page views for the quarter, increases of 8% and 11%, respectively, from the prior year period.

Balance Sheet Highlights
As of September 30, 2015, WebMD had: approximately $612 million in cash and cash equivalents; $803 million in aggregate principal amount of convertible notes outstanding; and approximately 37.5 million shares of its common stock outstanding (including approximately 1.0 million unvested shares of restricted stock).

During the third quarter, WebMD used $23.1 million in cash to repurchase approximately 558 thousand shares of its common stock under its stock repurchase program. As of September 30, 2015, approximately $34 millionremained available for repurchases under WebMD's stock repurchase program. Under the repurchase program, WebMD may repurchase shares from time to time in the open market, through block trades or in private transactions, depending on market conditions and other factors.   In addition, WebMD used $151.0 million in cash during the quarter to repurchase $149.6 million principal amount of its 2.25% Convertible Notes due 2016.

Financial Guidance 
Today, WebMD reaffirmed its 2015 revenue guidance and slightly increased its earnings guidance to reflect lower than anticipated expenses and the effect of convertible note and stock repurchases made since July 30, 2015. 

For the full year ending December 31, 2015, WebMD expects:

  • Revenue to be approximately $625 million to $635 million, an increase of 8% to 9% from the prior year.
    • Approximately $492 million to $500 million of revenue is expected to be from advertising and sponsorship, an increase of 8% to 10% from the prior year. Growth in advertising and sponsorship is expected to be driven primarily by growth in revenue from biopharma and medical device customers of approximately 11% to 12% in 2015.
    • Approximately $107 million to $108.5 million of revenue is expected to be from private portal services, an increase of 4% to 5% from the prior year.
    • Approximately $26 million to $26.5 million of revenue is expected to be from information services, an increase of 12% to 14% from the prior year.
  • Adjusted EBITDA to be approximately $185 million to $192 million, an increase of approximately 17% to 21% from the prior year.
  • Income from continuing operations and net income to be approximately $59 million to $64 million, an increase in income from continuing operations of approximately 44% to 56% from the prior year and an increase in net income of approximately 40% to 52% from the prior year.

For the fourth quarter of 2015, WebMD expects:

  • Revenue to be approximately $181 million to $191 million, an increase of approximately 11% to 17% from the prior year period.
  • Adjusted EBITDA to be approximately $59 million to $66 million, an increase of approximately 23% to 37% from the prior year period.
  • Income from continuing operations and net income to be approximately $22 million to $28 million, an increase in income from continuing operations of approximately 45% to 85% from the prior year period and an increase in net income of approximately 35% to 72% from the prior year period.

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

Analyst and Investor Conference Call
WebMD will hold a conference call with investors and analysts 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.comMedscape.comMedicineNet.comeMedicineHealth.comRxList.com, Medscape Education (Medscape.org) and other WebMD owned sites and apps.

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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 or momentum and our ability to capitalize on them; and the benefits expected from new or expected contracts with customers, 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 services and the timing of entry into and implementation of specific contracts with customers, including regulatory matters affecting their products and services; our ability to deploy new or updated services and to create new or enhanced revenue streams from those services; 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 information contained in 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. 

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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

 

Nine Months Ended

 
       

September 30,

 

September 30,

 
       

2015

 

2014

 

2015

 

2014

 
                       

Revenue

   

$       152,607

 

$       143,490

 

$     444,270

 

$     417,722

 

Cost of operations

   

59,552

 

56,398

 

177,836

 

163,418

 

Sales and marketing

   

32,850

 

32,950

 

97,896

 

99,182

 

General and administrative

   

22,942

 

23,243

 

67,397

 

69,363

 

Depreciation and amortization

   

7,266

 

7,667

 

23,103

 

22,037

 

Interest income

   

10

 

19

 

36

 

51

 

Interest expense

   

5,681

 

6,171

 

18,024

 

18,515

 

Loss on convertible notes

 

2,058

 

-

 

2,058

 

-

 

Gain on investments

 

-

 

-

 

139

 

-

 

Other expense

 

-

 

-

 

4,100

 

-

 
                       
                       

Income before income tax provision

 

22,268

 

17,080

 

54,031

 

45,258

 
 

Income tax provision

         

9,080

 

7,275

 

17,468

 

19,471

 

Net income

 

$         13,188

 

$           9,805

 

$       36,563

 

$       25,787

 
                       
                       

Net income per common share:

                 
 

Basic

         

$             0.36

 

$             0.26

 

$           1.00

 

$           0.67

 
 

Diluted

         

$             0.32

 

$             0.23

 

$           0.89

 

$           0.61

 
                       

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

                 
 

Basic

         

36,721

 

37,960

 

36,606

 

38,349

 
 

Diluted 

         

49,958

 

45,757

 

49,912

 

46,364

 

 

 

WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

 (In thousands, unaudited)

                       
                   
       

Three Months Ended

 

Nine Months Ended

 
       

September 30,

 

September 30,

 
       

2015

 

2014

 

2015

 

2014

 

Revenue

                 

Advertising and sponsorship

                 
 

Biopharma and medical device

       

$        89,870

 

$        85,118

 

$      251,692

 

$      235,587

 
 

OTC, CPG and other

       

28,850

 

27,370

 

89,047

 

91,342

 
       

118,720

 

112,488

 

340,739

 

326,929

 

Private portal services

 

27,460

 

25,795

 

83,223

 

74,612

 

Information services

 

6,427

 

5,207

 

20,308

 

16,181

 
       

$      152,607

 

$      143,490

 

$      444,270

 

$      417,722

 
                       

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

 

$        46,405

 

$        39,301

 

$      125,872

 

$      110,484

 
                       

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

                 
 

Interest income

       

10

 

19

 

36

 

51

 
 

Interest expense

       

(5,681)

 

(6,171)

 

(18,024)

 

(18,515)

 
 

Income tax provision

       

(9,080)

 

(7,275)

 

(17,468)

 

(19,471)

 
 

Depreciation and amortization 

       

(7,266)

 

(7,667)

 

(23,103)

 

(22,037)

 
 

Non-cash stock-based compensation

       

(9,142)

 

(8,402)

 

(24,731)

 

(24,725)

 
 

Loss on convertible notes

       

(2,058)

 

-

 

(2,058)

 

-

 
 

Gain on investments

       

-

 

-

 

139

 

-

 
 

Other expense

       

-

 

-

 

(4,100)

 

-

 
                       

 Net income 

 

$        13,188

 

$          9,805

 

$        36,563

 

$        25,787

 
                       

(a)

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

   

(b)

Reconciliation of Adjusted EBITDA to net income.

 

 

 

WEBMD HEALTH CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (In thousands)

           
           
     

September 30, 2015

 

December 31, 2014

     

(unaudited)

   

Assets

       

Cash and cash equivalents

 

$            612,332

 

$                   706,776

Accounts receivable, net

 

147,007

 

136,806

Prepaid expenses and other current assets

 

19,199

 

13,877

Deferred tax assets

 

12,627

 

18,147

        Total current assets

 

791,165

 

875,606

           

Property and equipment,  net

 

64,930

 

59,573

Goodwill

 

202,980

 

202,980

Intangible assets, net

 

11,716

 

14,215

Deferred tax assets

 

2,546

 

18,947

Other assets

 

21,585

 

26,236

Total Assets

 

$         1,094,922

 

$                1,197,557

           

Liabilities and Stockholders' Equity

       

Accrued expenses

 

$              68,317

 

$                     72,658

Deferred revenue

 

105,065

 

89,785

2.25% convertible notes due 2016

 

102,682

 

-

      Total current liabilities

 

276,064

 

162,443

           

2.25% convertible notes due 2016

 

-

 

252,232

2.50% convertible notes due 2018

 

400,000

 

400,000

1.50% convertible notes due 2020

 

300,000

 

300,000

Other long-term liabilities

 

21,965

 

21,293

           

Stockholders' equity

 

96,893

 

61,589

           

Total Liabilities and Stockholders' Equity

 

$         1,094,922

 

$                1,197,557

 

 

WEBMD HEALTH CORP.        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(In thousands, unaudited)

             
           

Nine Months Ended

           

September 30,

           

2015

 

2014

Cash flows from operating activities:

       
 

Net income

 

$           36,563

 

$        25,787

 

Adjustments to reconcile net income to net cash provided by

       
 

  operating activities:

       
   

Depreciation and amortization

 

23,103

 

22,037

   

Non-cash interest, net

 

3,276

 

3,384

   

Non-cash stock-based compensation

 

24,731

 

24,725

   

Deferred income taxes

 

(7,246)

 

6,791

   

Loss on convertible notes

 

2,058

 

-

   

Gain on investments

 

(139)

 

-

   

Changes in operating assets and liabilities:

       
     

Accounts receivable

 

(10,201)

 

10,784

     

Prepaid expenses and other, net

 

(5,692)

 

(2,429)

     

Accrued expenses and other long-term liabilities

 

(4,555)

 

(9,319)

     

Deferred revenue

 

15,280

 

(901)

       

Net cash provided by operating activities

 

77,178

 

80,859

                 

Cash flows from investing activities:

       
 

Cash paid in business combination

 

-

 

(3,182)

 

Proceeds from sale of investments

 

139

 

-

 

Purchases of property and equipment

 

(25,638)

 

(17,964)

       

Net cash used in investing activities

 

(25,499)

 

(21,146)

                 

Cash flows from financing activities:

       
 

Proceeds from exercise of stock options

 

15,185

 

35,857

 

Cash used for withholding taxes due on stock-based awards

 

(3,836)

 

(31,294)

 

Repurchase of convertible notes

 

(151,038)

 

-

 

Repurchase of shares through tender offers

 

-

 

(97,560)

 

Purchases of treasury stock 

 

(28,406)

 

(103,602)

 

Excess tax benefit on stock-based awards

 

21,972

 

11,853

       

Net cash used in financing activities

 

(146,123)

 

(184,746)

Net decrease in cash and cash equivalents

 

(94,444)

 

(125,033)

Cash and cash equivalents at beginning of period

 

706,776

 

824,880

Cash and cash equivalents at end of period

 

$         612,332

 

$      699,847

 

 

WEBMD HEALTH CORP.

NET INCOME PER COMMON SHARE

 (In thousands, except per share data, unaudited)

                       
                       
       

Three Months Ended

 

Nine Months Ended

 
       

September 30,

 

September 30,

 
       

2015

 

2014

 

2015

 

2014

 
                       
 

Numerator:

                 
 

Net income — Basic

 

$        13,188

 

$             9,805

 

$        36,563

 

$        25,787

 
   

Interest expense on 1.50% convertible notes, net of tax

 

864

 

864

 

2,592

 

2,592

 
   

Interest expense on 2.50% convertible notes, net of tax

 

1,797

 

-

 

5,392

 

-

 
 

Net income — Diluted

 

$        15,849

 

$           10,669

 

$        44,547

 

$        28,379

 
                       
                       
 

Denominator:

                 
 

Weighted-average shares — Basic

 

36,721

 

37,960

 

36,606

 

38,349

 
   

Stock options and restricted stock

 

1,338

 

2,113

 

1,407

 

2,333

 
   

1.50% convertible notes

 

5,694

 

5,684

 

5,694

 

5,682

 
   

2.50% convertible notes

 

6,205

 

-

 

6,205

 

-

 
 

Adjusted weighted-average shares after assumed conversions — Diluted

 

49,958

 

45,757

 

49,912

 

46,364

 
                       
                       
 

Net income per common share:

                 
   

Basic

 

$            0.36

 

$               0.26

 

$            1.00

 

$            0.67

 
   

Diluted

 

$            0.32

 

$               0.23

 

$            0.89

 

$            0.61

 

 

 

WEBMD HEALTH CORP.

FINANCIAL GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2015

(in millions, except per share amounts)

           
           
     

Guidance Range

Revenue

       
 

Advertising and sponsorship

       
 

Biopharma and medical device

 

$          364.0

 

$          370.0

 

OTC, CPG and other

 

128.0

 

130.0

     

492.0

 

500.0

 

Private portal services

 

107.0

 

108.5

 

Information services

 

26.0

 

26.5

     

$          625.0

 

$          635.0

           

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

 

$          185.0

 

$          192.0

           

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

       

     Interest expense, net

 

(23.1)

 

(23.1)

     Depreciation and amortization

 

(31.0)

 

(30.0)

     Non-cash stock-based compensation

 

(34.0)

 

(33.0)

     Loss on convertible notes

 

(2.1)

 

(2.1)

     Gain on investments

 

0.1

 

0.1

     Other expense

 

(4.1)

 

(4.1)

Income before income tax provision

 

90.8

 

99.8

           

Income tax provision

 

(32.0)

 

(35.5)

           

Income from continuing operations and net income

 

$            58.8

 

$            64.3

           

Income per share:

       

     Basic

 

$            1.61

 

$            1.74

     Diluted (c)

 

$            1.39

 

$            1.46

           

Calculation of income per share:

       
 

Net income (numerator for basic income per share)

 

$            58.8

 

$            64.3

 

Add-back of interest expense, net of tax, related to:

       
 

   1.50% convertible notes

 

3.5

 

3.5

 

   2.50% convertible notes

 

7.2

 

7.2

 

   2.25% convertible notes

 

3.5

 

3.5

 

Numerator for diluted income per share

 

$            73.0

 

$            78.5

           
 

Weighted average shares outstanding (denominator for basic income per share)

 

36.5

 

37.0

 

Stock options and restricted stock

 

1.5

 

2.0

 

Weighted average shares issuable upon conversion of:

       
 

   1.50% convertible notes

 

5.7

 

5.7

 

   2.50% convertible notes

 

6.2

 

6.2

 

   2.25% convertible notes

 

2.7

 

2.7

 

Denominator for diluted income per share

 

52.6

 

53.6

           
           
           

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

       
           

(b) Reconciliation of Adjusted EBITDA to net income

       
           

(c) See Supplemental 2015 Guidance for Income Per Share Calculation below

       
           

Additional information regarding forecast for the quarter ending December 31, 2015:

       

     -     Revenue is forecasted to be between $181 million to $191 million

   

     -     Revenue distribution is forecasted to be approximately 62% to Biopharma and medical device;

     22% to OTC, CPG and other; 13% to private portal services and 3% to information services

     -     Adjusted EBITDA is forecasted to be between $59 million to $66 million

   

     -     Net income is forecasted to be between $22 million to $28 million

   
           

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

 

 

WEBMD HEALTH CORP.

SUPPLEMENTAL 2015 GUIDANCE FOR INCOME PER SHARE CALCULATION

                         

Based on the Company's Financial Guidance for the Year Ending December 31, 2015, the 1.50% convertible notes, the 2.50% convertible notes and the 2.25% convertible notes are expected to be dilutive to net income on both the low end and high end of the full year guidance range.  Additionally, each of the series of convertible notes may be dilutive in certain quarters, depending on the amount of net income for such quarter.  The following table contains the approximate level of net income for an individual quarter and for the full year 2015 at which each of the series of convertible notes would become dilutive to income per share.  To the extent this net income is exceeded for any such period, the table also includes the amounts by which the numerator and denominator should each be adjusted for purposes of the diluted income per share calculation.  The amounts below assume a weighted-average diluted share count of 38.0 million shares (prior to the effect of convertible notes) and the amounts are subject to change as such weighted-average share count changes.

 
   
                         
 

Quarterly Amounts

 

Annual Amounts

 

All amounts in millions

1.50% 
Convertible
Notes

 

2.50% 
Convertible
Notes

 

2.25% 
Convertible
Notes

 

1.50% 
Convertible
Notes

 

2.50% 
Convertible
Notes

 

2.25% 
Convertible
Notes

 
                         

Approximate net income at which convertible notes  become dilutive:

$            5.8

 

$          11.8

 

$          13.0

 

$          23.1

 

$          47.2

 

$          52.3

 
                         

Interest expense, net of tax to add-back to net income (numerator):

$            0.9

 

$            1.8

 

$            0.4

 

$            3.5

 

$            7.2

 

$            3.5

 
                         

Additional shares to include in weighted-average diluted share count (denominator):

5.7

 

6.2

 

1.4

 

5.7

 

6.2

 

2.7

 

 

 

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") or income or loss from continuing operations calculated in accordance with GAAP (referred to below as "income from continuing operations").  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 net income or income from continuing operations.  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 or income from continuing operations, 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 or income from continuing operations 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 or income from continuing operations, 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 or income from continuing operations.  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 net income and income 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. 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

 

Nine Months Ended

         

September 30,

 

September 30,

         

2015

2014

 

2015

2014

             

Non-cash stock-based compensation included in:

         
 

Cost of operations

 

$    1,370

$    1,663

 

$    3,791

$    4,556

 

Sales and marketing

 

$    1,968

$    1,863

 

$    5,099

$    5,662

 

General and administrative

 

$    5,804

$    4,876

 

$  15,841

$  14,507

                     

 

  • 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

 

Nine Months Ended

         

September 30,

 

September 30,

         

2015

2014

 

2015

2014

             

Non-cash interest expense

         
 

2.25% Convertible Notes

 

$         282

$       390

 

$      1,062

$     1,170

 

2.50% Convertible Notes

 

$         447

$       446

 

$      1,339

$     1,339

 

1.50% Convertible Notes

 

$         291

$       292

 

$         875

$        875

 

Cash interest expense

           
 

2.25% Convertible Notes

 

$      1,036

$    1,418

 

$      3,873

$     4,256

 

2.50% Convertible Notes

 

$      2,500

$    2,500

 

$      7,500

$     7,500

 

1.50% Convertible Notes

 

$      1,125

$    1,125

 

$      3,375

$     3,375

                     

 

  • 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 or income from continuing operations. In recent periods, these other items included, but were not limited to: (i) gain on investments; (ii) settlements of litigation or claims; (iii) loss on repurchases of our convertible notes; and (iv) 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.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/webmd-announces-third-quarter-financial-results-300171561.html

SOURCE WebMD Health Corp.

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