- Published: 20 February 2009
- Written by Editor
WebMD Announces Fourth Quarter Financial Results
Total Revenue Increased 15%; Online Ad Revenue Increased 21%
WebMD Achieves Record Traffic with 54 Million Unique Monthly Users and 1.3 Billion Quarterly Page Views
WebMD Health Corp. (Nasdaq: WBMD) today announced financial results for the three months ended December 31, 2008.
"Our fourth quarter results confirm WebMD's market leadership in a challenging business environment. The size and breadth of the overall market opportunity for WebMD remains unchanged," said Wayne Gattinella, President and CEO. "We remain confident in our ability to continue to deliver strong results over the long term."
Financial Summary
Revenue for the fourth quarter was $111.5 million compared to $96.6 million in the prior year period, an increase of 15%. Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") for the fourth quarter was $33.8 million or $0.58 per share compared to $33.1 million or $0.55 per share in the prior year period.
Income from continuing operations for the fourth quarter was $33.1 million or $0.57 per share, compared to $45.1 million or $0.75 per share in the prior year period.
Net income for the fourth quarter was $32.9 million or $0.56 per share, compared to $48.3 million or $0.81 per share in the prior year period. Net income in the fourth quarter of 2008 included a $21.5 million tax benefit relating to the reversal of reserves related to deferred tax assets and a restructuring charge of $2.9 million. Net income in the fourth quarter of 2007 included a tax benefit of $24.7 million relating to the reversal of reserves related to deferred tax assets and a gain of $3.6 million related to the sale of a business.
WebMD had approximately $325 million in cash and investments at December 31, 2008.
Segment Operating Highlights
Online Services segment revenue was $108.8 million for the fourth quarter compared to $92.3 million in the prior year period, an increase of 18%. Advertising and sponsorship revenue increased 21%, from the prior year period, to $85.3 million. Private portal licensing revenue increased 8%, from the prior year period, to $23.2 million. Online Services segment Adjusted EBITDA was $34.1 million compared to $31.6 million in the prior year period.
Traffic to the WebMD Health Network continued to grow strongly, reaching a record average of 54 million unique users per month and total traffic of 1.3 billion page views during the fourth quarter, increases of 21% and 30%, respectively, from a year ago. In the fourth quarter, 1.5 million continuing medical education (CME) programs were completed on the WebMD Professional Network, an increase of 60% from the prior year period.
The base of large employers and health plans utilizing WebMD's private Health and Benefits portals during the fourth quarter was 134 as compared to 117 a year ago. The installed base of customers licensing the WebMD private portal platform now includes: Blue Cross Blue Shield of North Carolina, Hewlett Packard Company, International Union of Operating Engineers and Ohio State University.
Publishing and Other Services segment revenue was $2.8 million for the fourth quarter compared to $4.3 million in the prior year period. The decrease is primarily related to a decline in advertising in WebMD's Little Blue Book print products. Publishing and Other Services segment Adjusted EBITDA was a loss of $(338) thousand compared to a profit of $1.5 million in the prior year period.
Financial Guidance
WebMD reaffirmed its financial guidance for 2009 today. WebMD expects 2009 revenue to be $420 million to $450 million, an increase of 10% to 18% over 2008; Adjusted EBITDA to be $107 million to $122 million, an increase of 11% to 26% over 2008; income from continuing operations and net income of $30 million to $43 million, or $0.48 to $0.69 per share.
WebMD expects revenue to be in the range of $90 million to $92 million with Adjusted EBITDA representing approximately 19% of revenue for the first quarter of 2009. These amounts represent growth rates at the lower end of the annual financial guidance range and contemplate revenue growth of approximately 15% in advertising and sponsorship revenue and 4% in licensing revenue for the first quarter of 2009. Net income is estimated to be in the range of 2% to 3% of revenue for the first quarter of 2009.
Additional detail is provided in a schedule attached to this release.
Analyst and Investor Conference Call
As previously announced, WebMD will hold a conference call with investors and analysts to discuss its fourth quarter results at 4:45 pm (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 and health-focused publications. WebMD Health Corp. is a subsidiary of HLTH Corporation (Nasdaq: HLTH).
The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, eMedicine, eMedicine Health, RxList and theHeart.org.
All statements contained in this press release and the related analyst and investor conference call, other than statements of historical fact, are forward-looking statements, including those regarding: our guidance on WebMD's future financial results and other projections or measures of WebMD's future performance; market opportunities and WebMD's ability to capitalize on them; the benefits expected from new products or services and from other potential sources of additional revenue; and expectations regarding the market for WebMD's investments in auction rate securities (ARS). These statements speak only as of the date of this press release, are based on our current plans and expectations, and involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to: market acceptance of WebMD's products and services; WebMD's relationships with customers and strategic partners; changes in the markets for ARS; and changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet and information technology industries. Further information about these matters can be found in our Securities and Exchange Commission filings. Except as required by applicable law or regulation, we do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances.
This press release, and the accompanying tables, include both financial measures in accordance with accounting principles generally accepted in the 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(R), Medscape(R), eMedicine(R), MedicineNet(R), RxList(R), Subimo(R), Medsite(R), The Little Blue Book(R) and Summex(R), are trademarks of WebMD Health Corp. or its subsidiaries.
WEBMD HEALTH CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Revenue $111,532 $96,642 $382,777 $331,954
Costs and expenses:
Cost of operations 38,708 29,645 138,363 117,281
Sales and marketing 30,585 26,387 108,316 93,645
General and administrative 14,487 14,112 58,085 60,986
Depreciation and amortization 7,185 7,216 28,291 27,233
Interest income 2,033 3,856 10,452 12,378
Impairment of auction rate
securities - - 27,406 -
Restructuring 2,910 - 2,910 -
----- ------ ----- ------
Income from continuing
operations before income tax
(benefit) provision 19,690 23,138 29,858 45,187
Income tax (benefit)
provision (13,364) (21,926) 3,021 (17,255)
------- ------- ----- -------
Income from continuing
operations 33,054 45,064 26,837 62,442
(Loss) income from
discontinued operations,
net of tax (135) 3,232 (135) 3,442
---- ----- ---- -----
Net income $32,919 $48,296 $26,702 $65,884
======= ======= ======= =======
Basic income per common share:
Income from continuing
operations $0.57 $0.78 $0.46 $1.09
(Loss) income from
discontinued operations (0.00) 0.06 (0.00) 0.06
----- ---- ----- ----
Net income $0.57 $0.84 $0.46 $1.15
===== ===== ===== =====
Diluted income per common share:
Income from continuing
operations $0.57 $0.75 $0.46 $1.05
(Loss) income from
discontinued operations (0.01) 0.06 (0.01) 0.05
----- ---- ----- ----
Net income $0.56 $0.81 $0.45 $1.10
===== ===== ===== =====
Weighted-average shares
outstanding used in computing
basic and diluted net income
per common share:
Basic 57,771 57,534 57,717 57,184
====== ====== ====== ======
Diluted 58,384 59,748 58,925 59,743
====== ====== ====== ======
WEBMD HEALTH CORP.
CONSOLIDATED SEGMENT INFORMATION
(In thousands, except per share data, unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Revenue
Online Services:
Advertising and
sponsorship $85,296 $70,389 $275,790 $229,333
Licensing 23,198 21,556 89,126 81,471
Content syndication
and other 280 351 1,434 2,378
--- --- ----- -----
Total Online Services 108,774 92,296 366,350 313,182
Publishing and
Other Services 2,758 4,346 16,427 18,772
----- ----- ------ ------
$111,532 $96,642 $382,777 $331,954
======== ======= ======== ========
Earnings before interest,
taxes, non-cash and other
items ("Adjusted EBITDA") (a)
Online Services $34,148 $31,612 $95,435 $80,594
Publishing and
Other Services (338) 1,460 1,147 4,103
---- ----- ----- -----
33,810 33,072 96,582 84,697
Adjusted EBITDA per
basic common share $0.59 $0.57 $1.67 $1.48
----- ----- ----- -----
Adjusted EBITDA per
diluted common share $0.58 $0.55 $1.64 $1.42
----- ----- ----- -----
Interest, taxes, non-cash and
other items (b)
Interest income 2,033 3,856 10,452 12,378
Depreciation and
amortization (7,185) (7,216) (28,291) (27,233)
Non-cash advertising (3,361) (2,775) (5,097) (5,264)
Non-cash stock-based
compensation (2,697) (3,799) (13,472) (19,391)
Impairment of auction rate
securities - - (27,406) -
Restructuring (2,910) - (2,910) -
Income tax benefit
(provision) 13,364 21,926 (3,021) 17,255
------ ------ ------ ------
Income from continuing
operations 33,054 45,064 26,837 62,442
(Loss) income from
discontinued operations,
net of tax (135) 3,232 (135) 3,442
---- ----- ---- -----
Net income $32,919 $48,296 $26,702 $65,884
======= ======= ======= =======
Basic income per common share:
Income from continuing
operations $0.57 $0.78 $0.46 $1.09
(Loss) income from
discontinued operations (0.00) 0.06 (0.00) 0.06
----- ---- ----- ----
Net income $0.57 $0.84 $0.46 $1.15
===== ===== ===== =====
Diluted income per common share:
Income from continuing
operations $0.57 $0.75 $0.46 $1.05
(Loss) income from
discontinued operations (0.01) 0.06 (0.01) 0.05
----- ---- ----- ----
Net income $0.56 $0.81 $0.45 $1.10
===== ===== ===== =====
Weighted-average shares
outstanding used in computing
basic and diluted net
income per common share:
Basic 57,771 57,534 57,717 57,184
====== ====== ====== ======
Diluted 58,384 59,748 58,925 59,743
====== ====== ====== ======
(a) See Annex A - Explanation of Non-GAAP Financial Measures
(b) Reconciliation of Adjusted EBITDA to income from continuing operations
WEBMD HEALTH CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
December 31,
------------
2008 2007
---- ----
ASSETS
Current assets:
Cash and cash equivalents $191,659 $213,753
Short-term investments - 80,900
Accounts receivable, net 94,140 86,081
Current portion of prepaid advertising 1,753 2,329
Due from HLTH - 1,153
Other current assets 11,371 10,840
------ ------
Total current assets 298,923 395,056
Investments 133,563 -
Property and equipment, net 54,263 48,589
Prepaid advertising - 4,521
Goodwill 220,011 221,429
Intangible assets, net 26,599 36,314
Other assets 20,963 12,955
------ ------
$754,322 $718,864
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $31,354 $26,498
Deferred revenue 80,489 76,401
Due to HLTH 427 -
--- -------
Total current liabilities 112,270 102,899
Other long-term liabilities 8,334 9,210
Stockholders' equity 633,718 606,755
------- -------
$754,322 $718,864
======== ========
WEBMD HEALTH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Years Ended
December 31,
------------
2008 2007
---- ----
Cash flows from operating activities:
Net income $26,702 $65,884
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loss (income) from discontinued
operations, net of tax 135 (3,442)
Depreciation and amortization 28,291 27,233
Non-cash advertising 5,097 5,264
Non-cash stock-based compensation 13,472 19,391
Deferred and other income taxes 1,476 (20,953)
Impairment of auction rate
securities 27,406 -
Changes in operating assets and
liabilities:
Accounts receivable (8,059) 3,570
Accrued expenses and other
long-term liabilities 4,053 (7,185)
Due to/from HLTH 1,601 (3,278)
Deferred revenue 4,088 314
Other (1,350) 1,102
------ -----
Net cash provided by
continuing operations 102,912 87,900
Net cash used in
discontinued operations - (390)
------- ----
Net cash provided by
operating activities 102,912 87,510
Cash flows from investing activities:
Proceeds from maturities and
sales of available-for-sale
securities 44,000 212,923
Purchases of available-for-sale
securities (127,900) (284,333)
Purchases of property and
equipment (24,250) (18,058)
Cash paid in business combinations,
net of cash acquired (1,648) -
Purchase of investment in
preferred stock (6,471) -
------ ------
Net cash used in investing
activities (116,269) (89,468)
Cash flows from financing activities:
Proceeds from issuance of common stock 3,797 14,355
Tax benefit on stock-based awards 284 1,577
Net cash transfers with HLTH - 155,119
Purchases of treasury stock (12,818) -
------- -------
Net cash (used in) provided
by financing activities (8,737) 171,051
Net (decrease) increase in cash
and cash equivalents (22,094) 169,093
Cash and cash equivalents at
beginning of period 213,753 44,660
------- ------
Cash and cash equivalents at end
of period $191,659 $213,753
======== ========
FINANCIAL GUIDANCE SUMMARY
2009 Preliminary Financial Guidance
(in millions, except per share amounts)
Year Ending
December 31, 2009
Range
-----------------
Revenue $420.0 $450.0
====== ======
Earnings before interest, taxes,
non-cash and other items ("Adjusted
EBITDA") (a) $107.0 $122.0
Adjusted EBITDA per diluted common
share $1.73 $1.97
----- -----
Interest, taxes, non-cash and
other items (b)
Interest income 4.0 5.0
Depreciation and amortization (33.0) (30.0)
Non-cash advertising (1.5) (1.5)
Non-cash stock-based compensation (26.0) (23.0)
Income tax provision (20.6) (29.5)
----- -----
Net income $29.9 $43.0
===== =====
Net income per common share:
Basic $0.51 $0.73
===== =====
Diluted $0.48 $0.69
===== =====
Weighted-average shares outstanding
used in computing net income per
common share:
Basic 59.0 59.0
Diluted 62.0 62.0
(a) See Annex A - Explanation of Non-GAAP Financial Measures
(b) Reconciliation of Adjusted EBITDA to net income
Additional information regarding forecast for first quarter of 2009:
- Revenue is forecasted to be approximately $90 to $92 in quarter
ending March 31, 2009
- Adjusted EBITDA as a percentage of revenue is forecasted to be
approximately 19% in quarter ending March 31, 2009
- Net Income as a percentage of revenue is forecasted to be
approximately 2% to 3% in quarter ending March 31, 2009
Additional information regarding full year forecast:
- Income tax rate for 2009 is forecasted to be approximately 41% of
pretax income. The income tax provision excludes any benefit
relating to any reversal in 2009 of the valuation allowance
against deferred tax assets.
- The distribution of the annual revenue is expected to be
approximately 75% advertising and sponsorship, 21% licensing and
4% publishing and other. Quarterly revenue distributions may vary
from this annual estimate.
ANNEX A
Explanation of Non-GAAP Financial Measures
(All dollar amounts in thousands)
The accompanying WebMD Health Corp. press release and financial tables include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measures represent earnings before interest, taxes, non-cash and other items (which we refer to as "Adjusted EBITDA") and related per share amounts. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, "income (loss) from continuing operations" or "net income (loss)" calculated in accordance with GAAP. The tables attached to the accompanying press release include reconciliations of non-GAAP financial measures to GAAP financial measures.
Adjusted EBITDA is used by WebMD's management as an additional measure of WebMD's overall performance and its reporting segments' performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluating potential acquisitions or divestitures. Period-to-period comparisons of Adjusted EBITDA help WebMD's management identify additional trends in WebMD's and its reporting segments' financial results that may not be shown solely by period-to-period comparisons of income (loss) from continuing operations or net income (loss). In addition, WebMD uses Adjusted EBITDA in the incentive compensation programs applicable to many of its employees in order to evaluate WebMD's performance. WebMD management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. In order to compensate for those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in income (loss) from continuing operations or net income (loss), as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliations of Adjusted EBITDA to income (loss) from continuing operations or to net income (loss) that accompany our press releases containing non-GAAP financial measures, including the reconciliations contained in the tables attached to the accompanying press release.
WebMD believes that the presentation of Adjusted EBITDA is useful to investors in their analysis of WebMD's results for reasons similar to the reasons why WebMD's management finds it useful and because it helps facilitate investor understanding of decisions made by WebMD's management in light of the performance metrics used in making those decisions. In addition, as more fully described below, WebMD believes that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to income (loss) from continuing operations or to net income (loss), helps investors make comparisons between WebMD and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. However, Adjusted EBITDA is intended to provide a supplemental way of comparing WebMD with other public companies and is not intended as a substitute for comparisons based on "income (loss) from continuing operations" or "net income (loss)" calculated in accordance with GAAP. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.
The following is an explanation of the items excluded by WebMD from Adjusted EBITDA but included in income (loss) from continuing operations:
-- Depreciation and Amortization. Depreciation and amortization expense is
a non-cash expense relating to capital expenditures and intangible
assets arising from acquisitions that are expensed on a straight-line
basis over the estimated useful life of the related assets. WebMD
excludes depreciation and amortization expense from Adjusted EBITDA
because it believes (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of
WebMD's business operations and (ii) such expenses can vary
significantly between periods as a result of new acquisitions and full
amortization of previously acquired tangible and intangible assets.
Accordingly, WebMD believes this exclusion assists management and
investors in making period-to-period comparisons of operating
performance. Investors should note that use of tangible and intangible
assets contributed to revenue in the periods presented and will
contribute to future revenue generation and should also note that such
expenses will recur in future periods.
-- Stock-Based Compensation Expense. Stock-based compensation expense is a
non-cash expense arising from the grant of stock-based awards to
employees. WebMD believes that excluding the effect of stock-based
compensation from Adjusted EBITDA assists management and investors in
making period-to-period comparisons in its operating performance because
it believes (i) the amount of such expenses in any specific period may
not directly correlate to the underlying performance of WebMD's
business operations and (ii) such expenses can vary significantly
between periods as a result of the timing of grants of new stock-based
awards, including grants in connection with acquisitions. Additionally,
WebMD believes that excluding stock-based compensation from Adjusted
EBITDA assists management and investors in making meaningful comparisons
between WebMD's operating performance and the operating performance
of other companies that may use different forms of employee compensation
or different valuation methodologies for their stock-based compensation.
Investors should note that stock-based compensation is a key incentive
offered to employees whose efforts contributed to the operating results
in the periods presented and are expected to contribute to operating
results in future periods. Investors should also note that such
expenses will recur in the future. Stock-based compensation expenses
included in the Statement of Operations are summarized as follows:
Three Months Ended Years Ended
December 31, December 31,
2008 2007 2008 2007
Non-cash stock-based compensation
included in:
Cost of operations $(893) $(904) $(3,843) $(5,063)
Sales and marketing (7) (1,167) (3,631) (5,056)
General and administrative (1,797) (1,728) (5,998) (9,272)
-- Non-Cash Advertising Expense. This expense relates to the usage of
non-cash advertising obtained from News Corporation
("Newscorp") in exchange for equity securities issued by our
parent, HLTH Corporation in 2000. The advertising is available only on
various Newscorp properties, primarily its television network and cable
channels, without any cash cost to WebMD and will expire later this
year. WebMD does not incur any other cash expenses related to airing of
television advertising. WebMD excludes this expense from Adjusted EBITDA
(i) because it is a non-cash expense, (ii) because it is incremental to
other non-television cash advertising expense that WebMD otherwise
incurs, (iii) because WebMD has not and believes it will not incur cash
expenses relating to television advertising in the future and (iv) to
assist management and investors in comparing its operating results over
multiple periods. Investors should note that it is likely that WebMD
derives some benefit from such advertising. Non-cash advertising
expenses included in the Consolidated Statement of Operations in Sales
and Marketing expense were $3,361 and $2,775 for the three months ended
December 31, 2008 and 2007, respectively, and $5,097 and $5,264 for the
year ended December 31, 2008 and 2007, respectively.
-- Interest Income. Interest income is associated with the level of
marketable debt securities and other interest bearing accounts in which
WebMD invests. Interest income varies over time due to varying levels
of securities available for investment. Transactions that WebMD has
entered into in recent periods that have impacted securities available
for investment include the initial public offering of equity in WebMD
and acquisitions of other companies for varying amounts of cash since
our initial public offering. Additional financing transactions as well
as potential acquisitions that WebMD may enter into in the future could
impact the levels and timing of securities available for investment.
WebMD excludes interest income from Adjusted EBITDA (i) because it is
not directly attributable to the performance of WebMD's business
operations and, accordingly, its exclusion assists management and
investors in making period-to-period comparisons of operating
performance and (ii) to assist management and investors in making
comparisons to companies with different capital structures. Investors
should note that interest income will recur in future periods.
-- Income Tax (Benefit) Provision. WebMD has a net operating loss (NOL)
carryforward for which it maintained a full valuation allowance until
the fourth quarter of 2007. During 2008 and 2007, a portion of the
valuation allowance was reversed after consideration of the relevant
factors. The related valuation allowances are either reversed through
the income statement, additional paid-in capital, or reversed to
goodwill, to the extent those tax benefits were acquired through
business combinations. The timing of such reversals has not been
consistent and as a result, WebMD's income tax expense can
fluctuate significantly from period to period in a manner not directly
related to WebMD's operating performance. WebMD excludes the
income tax (benefit) provision from Adjusted EBITDA (i) because it
believes that the income tax (benefit) provision is not directly
attributable to the underlying performance of WebMD's business
operations and, accordingly, its exclusion assists management and
investors in making period-to-period comparisons of operating
performance and (ii) to assist management and investors in making
comparisons to companies with different tax attributes. Investors
should note that income tax (benefit) provision will recur in future
periods.
-- Other Items. WebMD engages in other activities and transactions that
can impact WebMD's overall income (loss) from continuing
operations. WebMD excludes these other items from Adjusted EBITDA when
it believes these activities or transactions are not directly
attributable to the performance of WebMD's business operations and,
accordingly, their exclusion assists management and investors in making
period-to-period comparisons of operating performance. Investors should
note that these other items may recur in future periods. In the
accompanying press release and financial tables, WebMD has excluded loss
on the impairment of auction rate securities and a restructuring charge
from Adjusted EBITDA.
