WebMD Reports Strong Second Quarter Revenue and Earnings Growth

Download PDF

NEW YORK, Aug. 8, 2016 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the three months ended June 30, 2016.

"WebMD's second quarter results reflect our consistent execution and leadership in a fast-paced, dynamic digital marketplace," said David Schlanger, Chief Executive Officer, WebMD. "We continue to invest in our user experience and advertiser products and are well positioned as a key partner to our biopharma and OTC/CPG customers. Today, we are pleased to reaffirm our strong outlook for 2016." 

Financial Highlights

For the three months ended June 30, 2016:

  • Revenue was $167.6 million, compared to $148.3 million in the prior year period, an increase of 13%. Advertising and sponsorship revenue was $131.7 millioncompared to $116.2 million in the prior year period. Health services revenue, which we previously reported as private portal services revenue, was $28.6 million compared to $26.4 million in the prior year period. Information services revenue was $7.2 million compared to $5.7 million in the prior year period.  
  • Net income increased 33% to $17.8 million or $0.39 per diluted share compared to $13.4 million, or $0.32 per diluted share in the prior year period.
  • Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") increased 23% to $50.1 million, or 30% of revenue, compared to $40.5 million, or 27% of revenue, in the prior year period.  

Balance Sheet Highlights

In June 2016, WebMD completed the private placement of $360 millionaggregate principal amount of 2.625% Convertible Notes due 2023. The notes are convertible into shares of WebMD common stock at an initial conversion price of approximately $87.07 per share, which reflected a premium of approximately 30% over the closing price at the time of the issuance.

As of June 30, 2016, WebMD had: approximately $1.02 billion in investments and cash and cash equivalents; $1.06 billion in aggregate principal amount of convertible notes outstanding; and approximately 39 million shares of its common stock outstanding (including approximately 700 thousand unvested shares of restricted stock).

During the second quarter, WebMD did not repurchase any shares of its common stock under its stock repurchase program. As of June 30, 2016, approximately $34 million remained available for repurchases under WebMD's stock repurchase program. Under its stock 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.

Traffic Highlights

Traffic to the WebMD Health Network during the second quarter of 2016 reached an average of 199.0 million unique users per month generating 4.23 billion page views for the quarter, representing a 6% decrease in users and a 3% increase in page views, when compared to the prior year period. "We continue to successfully navigate changing engagement patterns and user preferences and to raise the bar in digital health," said Mr. Schlanger. "In the second quarter, WebMD reported 13% advertising revenue growth on 3% page view growth. We are able to achieve that because the majority of our advertising revenue is driven by certain highly targeted audiences."

Financial Guidance

Today, WebMD reaffirmed the 2016 revenue and Adjusted EBITDA guidance that it provided on May 4, 2016 and updated its 2016 net income guidance principally to reflect the issuance of 2.625% convertible notes during the second quarter.

For the full year ending December 31, 2016, WebMD expects:

  • Revenue to be approximately $695 million to $708 million, an increase of 9% to 11% from the prior year.
    • $559 million to $570 million of revenue is expected to be from advertising and sponsorship, an increase of 12% to 14% from the prior year. Growth in advertising and sponsorship revenue is expected to be driven by growth in revenue from biopharma customers of approximately 15% to 17%.
    • $109 million to $110 million of revenue is expected to be from health services revenue, compared to $110.4 million in 2015.
    • $27 million to $28 million of revenue is expected to be from information services, compared to $26.9 million in 2015.
  • Net income to be approximately $82 million to $89.5 million, or $1.78 to $1.90per diluted share, compared to $64 million, or $1.48 per diluted share, in 2015.
  • Adjusted EBITDA to be approximately $224 million to $232 million, an increase of 16% to 20% from the prior year. Adjusted EBITDA, as a percentage of revenue, is expected to be approximately 32% to 33%, compared to 30% in the prior year.

For the third quarter of 2016, WebMD expects:

  • Revenue to be approximately $168 million to $171 million, an increase of 10% to 12% from the prior year period.
  • Net income to be approximately $17.0 million to $18.5 million, an increase of approximately 29% to 40% from the prior year period.
  • Adjusted EBITDA to be approximately $50.5 million to $52.5 million, an increase of approximately 9% to 13% 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.

*****************************

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.

*************************************

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®, 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,

 
       

2016

 

2015

 

2016

 

2015

 
                       

Revenue

     

$       167,583

 

$       148,320

 

$     326,136

 

$     291,663

 

Cost of operations

     

65,788

 

60,407

 

128,301

 

118,284

 

Sales and marketing

     

35,614

 

32,570

 

69,370

 

65,046

 

General and administrative

     

23,983

 

23,002

 

47,739

 

44,455

 

Depreciation and amortization

     

7,672

 

7,592

 

15,159

 

15,837

 

Interest income

     

367

 

9

 

573

 

26

 

Interest expense

     

5,265

 

6,171

 

10,365

 

12,343

 

Gain on investments

 

-

 

139

 

-

 

139

 

Other expense

 

-

 

4,100

 

-

 

4,100

 
                       
                       

Income before income tax provision

 

29,628

 

14,626

 

55,775

 

31,763

 

    Income tax provision

 

11,848

 

1,255

 

22,277

 

8,388

 

Net income

 

$         17,780

 

$         13,371

 

$       33,498

 

$       23,375

 
                       
                       

Net income per common share:

                 

 

    Basic

 

$             0.47

 

$             0.36

 

$           0.89

 

$           0.64

 

 

    Diluted

 

$             0.39

 

$             0.32

 

$           0.75

 

$           0.57

 
                       

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

               
                   

 

    Basic

 

38,041

 

36,705

 

37,654

 

36,549

 

 

    Diluted

 

51,948

 

53,618

 

52,142

 

43,684

 
                       

 

 

WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

 (In thousands, unaudited)

                       
                   
       

Three Months Ended

 

Six Months Ended

 
       

June 30,

 

June 30,

 
       

2016

 

2015

 

2016

 

2015

 

Revenue

                 

Advertising and sponsorship

                 
 

Biopharma and medical device

 

$      100,620

 

$        85,977

 

$      189,305

 

$      161,822

 
 

OTC, CPG and other

 

31,127

 

30,249

 

64,881

 

60,197

 
       

131,747

 

116,226

 

254,186

 

222,019

 

Health services

 

28,632

 

26,441

 

56,887

 

55,763

 

Information services

 

7,204

 

5,653

 

15,063

 

13,881

 
       

$      167,583

 

$      148,320

 

$      326,136

 

$      291,663

 
                       

Earnings before interest, taxes, non-cash

                 
 

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

 

$        50,070

 

$        40,549

 

$        97,126

 

$        79,467

 
                       

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

                 
 

Interest income

 

367

 

9

 

573

 

26

 
 

Interest expense

 

(5,265)

 

(6,171)

 

(10,365)

 

(12,343)

 
 

Income tax provision

 

(11,848)

 

(1,255)

 

(22,277)

 

(8,388)

 
 

Depreciation and amortization

 

(7,672)

 

(7,592)

 

(15,159)

 

(15,837)

 
 

Non-cash stock-based compensation

 

(7,872)

 

(8,208)

 

(16,400)

 

(15,589)

 
 

Gain on investments

 

-

 

139

 

-

 

139

 
 

Other expense

 

-

 

(4,100)

 

-

 

(4,100)

 
                       

 Net income

 

$        17,780

 

$        13,371

 

$        33,498

 

$        23,375

 
                       

(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)

           
     

June 30,

 

December 31,

     

2016

 

2015

     

(unaudited)

   

Assets

       

Cash and cash equivalents

 

$            69,545

 

$        641,165

Accounts receivable, net

 

158,489

 

174,313

Investments

 

948,661

 

-

Prepaid expenses and other current assets

 

16,570

 

18,998

 

Total current assets

 

1,193,265

 

834,476

           

Property and equipment,  net

 

87,198

 

81,027

Goodwill

 

202,980

 

202,980

Intangible assets, net

 

9,334

 

10,894

Deferred tax assets, net

 

12,217

 

15,694

Other assets

 

10,606

 

10,852

Total Assets

 

$       1,515,600

 

$     1,155,923

           

Liabilities and Stockholders' Equity

       

Accrued expenses

 

$            65,235

 

$          80,664

Deferred revenue

 

117,301

 

102,715

2.25% convertible notes due 2016, net

 

-

 

102,523

 

Total current liabilities

 

182,536

 

285,902

           

2.50% convertible notes due 2018, net

 

397,174

 

396,281

1.50% convertible notes due 2020, net

 

294,849

 

294,266

2.625% convertible notes due 2023, net

 

350,369

 

-

Other long-term liabilities

 

23,572

 

23,246

           

Stockholders' equity

 

267,100

 

156,228

           

Total Liabilities and Stockholders' Equity

 

$       1,515,600

 

$     1,155,923

           

 

 

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

                 
             
           

Six Months Ended

           

June 30,

           

2016

 

2015

Cash flows from operating activities:

       
 

Net income

 

$           33,498

 

$        23,375

 

Adjustments to reconcile net income to net cash provided by

       
 

  operating activities:

       
   

Depreciation and amortization

 

15,159

 

15,837

   

Non-cash interest, net

 

1,750

 

2,256

   

Non-cash stock-based compensation

 

16,400

 

15,589

   

Deferred income taxes

 

3,309

 

(6,476)

   

Gain on investments

 

-

 

(139)

   

Changes in operating assets and liabilities:

       
     

Accounts receivable

 

15,824

 

(12,282)

     

Prepaid expenses and other, net

 

785

 

(6,130)

     

Accrued expenses and other long-term liabilities

 

(15,152)

 

(14,465)

     

Deferred revenue

 

14,586

 

25,080

       

Net cash provided by operating activities

 

86,159

 

42,645

                 

Cash flows from investing activities:

       
 

Purchases of property and equipment

 

(19,858)

 

(8,711)

 

Purchase of investments

 

(948,078)

 

-

 

Partial redemption of cost-method investment

 

526

 

-

 

Proceeds from sale of investments

 

-

 

139

       

Net cash used in investing activities

 

(967,410)

 

(8,572)

                 

Cash flows from financing activities:

       
 

Proceeds from exercise of stock options

 

49,412

 

11,653

 

Cash used for withholding taxes due on stock-based awards

 

(3,810)

 

(2,960)

 

Net proceeds from issuance of convertible notes

 

350,254

 

-

 

Maturity of convertible notes

 

(102,682)

 

-

 

Purchases of treasury stock

 

-

 

(5,351)

 

Excess tax benefit on stock-based awards

 

16,457

 

13,191

       

Net cash provided by financing activities

 

309,631

 

16,533

Net (decrease) increase in cash and cash equivalents

 

(571,620)

 

50,606

Cash and cash equivalents at beginning of period

 

641,165

 

706,776

Cash and cash equivalents at end of period

 

$           69,545

 

$      757,382

                 

 

 

WEBMD HEALTH CORP.

NET INCOME PER COMMON SHARE

 (In thousands, except per share data, unaudited)

                     
                     
       

Three Months Ended

 

Six Months Ended

       

June 30,

 

June 30,

       

2016

 

2015

 

2016

 

2015

                     
 

Numerator:

               
 

Net income - Basic

 

$        17,780

 

$           13,371

 

$        33,498

 

$        23,375

   

Interest expense on 1.50% convertible notes, net of tax

 

878

 

864

 

1,757

 

1,728

   

Interest expense on 2.50% convertible notes, net of tax

 

1,827

 

1,797

 

3,653

 

-

   

Interest expense on 2.25% convertible notes, net of tax

 

-

 

1,103

 

457

 

-

 

Net income - Diluted

 

$        20,485

 

$           17,135

 

$        39,365

 

$        25,103

                     
                     
 

Denominator:

               
 

Weighted-average shares - Basic

 

38,041

 

36,705

 

37,654

 

36,549

   

Stock options and restricted stock

 

2,008

 

1,503

 

1,882

 

1,441

   

1.50% convertible notes

 

5,694

 

5,694

 

5,694

 

5,694

   

2.50% convertible notes

 

6,205

 

6,205

 

6,205

 

-

   

2.25% convertible notes

 

-

 

3,511

 

707

 

-

 

Adjusted weighted-average shares after assumed conversions - Diluted

 

51,948

 

53,618

 

52,142

 

43,684

                     
                     
 

Net income per common share:

               
   

Basic

 

$            0.47

 

$               0.36

 

$            0.89

 

$            0.64

   

Diluted

 

$            0.39

 

$               0.32

 

$            0.75

 

$            0.57

                     

 

 

WEBMD HEALTH CORP.

 

FINANCIAL GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2016

 

(In millions, except per share amounts)

 
             
             
     

Guidance Range

 

Revenue

         
 

Advertising and sponsorship

         
 

  Biopharma and medical device

 

$          428.0

 

$          436.0

 
 

  OTC, CPG and other

 

131.0

 

134.0

 
     

559.0

 

570.0

 
 

Health services

 

109.0

 

110.0

 
 

Information services

 

27.0

 

28.0

 
     

$          695.0

 

$          708.0

 
             

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

 

$          224.0

 

$          232.0

 
             

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

         

     Interest expense, net

 

(22.0)

 

(22.0)

 

     Depreciation and amortization

 

(33.0)

 

(31.0)

 

     Non-cash stock-based compensation

 

(34.0)

 

(32.0)

 

Income before income tax provision

 

135.0

 

147.0

 

Income tax provision

 

(53.0)

 

(57.5)

 
             

Net income

 

$            82.0

 

$            89.5

 
             

Income per share:

         

     Basic

 

$            2.15

 

$            2.32

 

     Diluted (c)

 

$            1.78

 

$            1.90

 
             

Calculation of income per share:

         
 

Net income (numerator for basic income per share)

 

$            82.0

 

$            89.5

 
 

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

         
 

   1.50% convertible notes

 

3.5

 

3.5

 
 

   2.50% convertible notes

 

7.3

 

7.3

 
 

   2.25% convertible notes

 

0.5

 

0.5

 
 

   2.625% convertible notes

 

3.9

 

3.9

 
 

Numerator for diluted income per share

 

$            97.2

 

$          104.7

 
             
 

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

 

38.2

 

38.5

 
 

Stock options and restricted stock

 

1.7

 

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

 

0.4

 

0.4

 
 

   2.625% convertible notes

 

2.4

 

2.4

 
 

Denominator for diluted income per share

 

54.6

 

55.2

 
             
             
             

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

         

(b) Reconciliation of Adjusted EBITDA to net income

         

(c) See Supplemental 2016 Guidance for Income Per Share Calculation below

     
             

Additional information regarding forecast for the quarter ending September 30, 2016:

     

     -     Revenue is forecasted to be between $168 million to $171 million

     

     -     Revenue distribution is forecasted to be:  approximately 62% from Advertising and sponsorship - Biopharma and medical device;

17.5% from Advertising and sponsorship - OTC, CPG and other; 16.5% from health services; and 4% from information services

     -     Net income is forecasted to be between $17 million to $18.5 million

     

     -     Adjusted EBITDA is forecasted to be between $50.5 million to $52.5 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 2016 GUIDANCE FOR INCOME PER SHARE CALCULATION

                             

Based on the Company's Financial Guidance for the Year Ending December 31, 2016, the 1.50% convertible notes, the 2.50% convertible notes, the

 

2.25% convertible notes and the 2.625% 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, the 1.50% convertible notes, the 2.50% convertible notes and the 2.625% convertible notes may be dilutive in certain

 

future quarters, depending on the amount of net income for such quarter.  The following table contains the approximate level of net income for an

 

individual future quarter and for the full year 2016 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.

                     
                             
 

Quarterly Amounts

 

Annual Amounts

 

All amounts in millions

1.50% 
Convertible
Notes

 

2.50% 
Convertible
Notes

 

2.625% 
Convertible
Notes

 

1.50% 
Convertible
Notes

 

2.50% 
Convertible
Notes

 

2.25% 
Convertible
Notes  (a)

 

2.625% 
Convertible
Notes  (b)

 
                             

Approximate net income at which 
convertible notes become dilutive  (c)

$            6.2

 

$           12.5

 

$           18.4

 

$           24.6

 

$           50.2

 

$           56.1

 

$           73.7

 
                             

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

$            0.9

 

$             1.8

 

$             1.7

 

$             3.5

 

$             7.3

 

$             0.5

 

$             3.9

 
                             

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

5.7

 

6.2

 

4.1

 

5.7

 

6.2

 

0.4

 

2.4

 
                             

(a)  Since the 2.25% convertible notes matured on March 31, 2016, amounts for the 2.25% convertible notes are only shown in the Annual Amounts column

       and reflect the impact of the 2.25% convertible notes, weighted for the period that they were outstanding during the year ending December 31, 2016.

 
                             

(b)  Since the 2.625% convertible notes were issued on June 1, 2016, the amounts shown in the Annual Amounts column reflect the impact of the

 

        2.625% convertible notes, weighted for the period that they will be outstanding during the year ending December 31, 2016.

     
                             

(c)  These net income amounts assume a weighted-average diluted share count of  39.9 million shares attributable to common shares, stock options

 

       and restricted stock (prior to the effect of convertible notes) and are subject to change as such weighted-average share count changes.

 

 

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. 

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.

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:

 

 

                 

Three Months Ended

 

Six Months Ended

                 

June 30,

 

June 30,

                 

2016

2015

 

2016

2015

                     
       

Non-cash stock-based compensation included in:

         
         

Cost of operations

 

$    1,140

$    1,032

 

$    2,430

$    2,421

         

Sales and marketing

 

$    1,382

$    1,683

 

$    2,944

$    3,131

         

General and administrative

 

$    5,350

$    5,493

 

$  11,026

$  10,037

                             

 

  • 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,

                 

2016

2015

 

2016

2015

                     
       

Non-cash interest expense

         
         

2.25% Convertible Notes

 

$            —

$       390

 

$         159

$       780

         

2.50% Convertible Notes

 

$         447

$       446

 

$         893

$       892

         

1.50% Convertible Notes

 

$         291

$       292

 

$         583

$       584

         

2.625% Convertible Notes

 

$         115

$          —

 

$         115

$          —

       

 

Cash interest expense

           
         

2.25% Convertible Notes

 

$            —

$    1,418

 

$         577

$    2,837

         

2.50% Convertible Notes

 

$      2,500

$    2,500

 

$      5,000

$    5,000

         

1.50% Convertible Notes

 

$      1,125

$    1,125

 

$      2,250

$    2,250

         

2.625% Convertible Notes

 

$         788

$          —

 

$         788

$          —

                             

 

  • 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 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-reports-strong-second-quarter-revenue-and-earnings-growth-300310662.html

SOURCE WebMD Health Corp.

News Provided by Acquire Media

WebMD Press Release
© 2016 WebMD, LLC. All rights reserved.