WebMD Announces Second Quarter Financial Results PR Newswire NEW YORK, July 31, 2013 NEW YORK, July 31, 2013 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the three months ended June 30, 2013. "We are pleased to report strong second quarter results and reaffirm our increased revenue and earnings expectations for the balance of 2013," said David J. Schlanger, Interim CEO, WebMD. "WebMD's market leadership is demonstrated by our ability to meet the demands of consumers and physicians with health information and tools tailored to their specific interests at the right time on the right screen through our websites, mobile optimized sites and apps." Financial Highlights For the three months ended June 30, 2013: oRevenue was $125.3 million, compared to $112.7 million in the prior year period, an increase of 11%. Public portal advertising and sponsorship revenue was $105.8 million, compared to $93.7 million in the prior year period. Private portal services revenue was $19.5 million, compared to $18.9 million in the prior year period. oEarnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") increased 105% to $29.2 million, or 23.3% of revenue, compared to $14.2 million, or 12.6% of revenue, in the prior year period. oNet income was $2.6 million, or $0.05 per diluted share, compared to a net loss of $(5.6) million, or $(0.11) per diluted share, in the prior year period. These results are consistent with the preliminary release issued by the Company on July 12, 2013. Balance Sheet Highlights As of June 30, 2013, WebMD had approximately $1 billion in cash and cash equivalents and $800 million in aggregate principal amount of convertible notes outstanding. Traffic Highlights Traffic to the WebMD Health Network during the second quarter reached an average of 125.5 million unique users per month and total traffic of 2.64 billion page views for the quarter, increases of 17% and 6%, respectively, from the prior year period. Increased 2013 Financial Guidance Reaffirmed WebMD reaffirmed its 2013 financial guidance which it increased on July 12, 2013 in conjunction with the announcement of its preliminary second quarter financial results. David J. Schlanger said, "We are continuing to see momentum in our public portals advertising business, particularly with our biopharmaceutical customers. We are well positioned to take advantage of the opportunities ahead of us." The Company's reaffirmed financial guidance is summarized as follows: WebMD expects the following for 2013: oRevenue of $485 million to $505 million, an increase of 3% to 7% from the prior year. oAdjusted EBITDA of $100 million to $110 million, an increase of 37% to 50% from the prior year. oNet income of $3 million to $11 million. Net loss in the prior year was $(20.3) million. WebMD expects 2013 revenue distribution to be: oApproximately 83% from public portals advertising and sponsorship, representing growth of approximately 3% to 7% over the prior year, and oApproximately 17% from private portal licensing, representing growth of approximately 5% to 9% over the prior year. WebMD's reaffirmed guidance reflects: (a) actual results for the first half of 2013; (b) visibility for the second half of 2013 based upon several factors, including orders received to date and those expected over the balance of the year; and (c) anticipated expenses relating to new private portal customer implementations as well as public portal initiatives such as enhanced data and analytics and new content and enhanced offerings for both users and advertisers. For the third quarter of 2013, WebMD expects: oRevenue to be in excess of $128 million; oAdjusted EBITDA to be in excess of 22% of revenue; and oNet income to be approximately 3% of revenue. A schedule summarizing the Company's current financial guidance is attached to this press release. Termination of Stockholder Rights Plan The Board of Directors has approved the termination of WebMD's Stockholder Rights Plan. The Board believes the Rights Plan, which was first adopted in November 2011, has served its purpose during what was a challenging period for the Company and has determined that it is not necessary to continue the Rights Plan at this time. The termination of the Rights Plan is expected to be completed within the next week. WebMD's Board of Directors may, in the future, adopt a new rights agreement or comparable plan if, in the exercise of its fiduciary duties, it determines that such adoption is in the best interests of WebMD and its stockholders. Analyst and Investor Conference Call WebMD will hold a conference call with investors and analysts to discuss its second quarter results at 4:45 p.m. (Eastern) today. The call can be accessed at www.wbmd.com (in the Investor Relations section). A replay of the audio webcast will be available at the same web address. About WebMD WebMD Health Corp. (NASDAQ: WBMD) is the leading provider of health information services, serving consumers, physicians, healthcare professionals, employers, and health plans through our public and private online portals, mobile platforms and health-focused publications. The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, eMedicineHealth, RxList, theheart.org, Medscape Education and other owned WebMD sites. ***************************** All statements contained in this press release and the related analyst and investor conference call, other than statements of historical fact, are forward-looking statements, including those regarding: guidance on our future financial results and other projections or measures of our future performance; market opportunities and our ability to capitalize on them; and the benefits expected from new or expected contracts with customers, new or updated products or services and from other potential sources of additional revenue. These statements speak only as of the date of this press release, are based on our current plans and expectations, and involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to:market acceptance of our products and services; our relationships with customers and other factors affecting their use of our products and services, including regulatory matters affecting their products; our ability to successfully implement changes to, among other things, our product and service offerings, capital allocation plans and cost structure; our ability to attract and retain qualified personnel; and changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet and information technology industries. Further information about these matters can be found in our Securities and Exchange Commission filings and this press release is intended to be read in conjunction with those filings. Except as required by applicable law or regulation, we do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances. ************************************* 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, 2013 2012 2013 2012 Revenue $ $ $ $ 125,317 112,668 238,079 219,615 Cost of operations 51,596 54,243 98,539 107,714 Sales and marketing 31,422 31,822 62,355 61,925 General and administrative 24,282 21,746 47,816 50,768 Depreciation and 6,635 6,713 13,488 13,643 amortization Interest income 17 34 38 45 Interest expense 5,832 5,832 11,664 11,668 Gain on investments - - - 8,074 Other expense 1,353 1,097 1,353 2,297 Income (loss) from continuing operations before income tax provision (benefit) 4,214 (8,751) 2,902 (20,281) Income tax provision 1,603 (2,649) 1,829 (6,402) (benefit) Income (loss) from 2,611 (6,102) 1,073 (13,879) continuing operations Income from discontinued - 508 - 508 operations, net of tax Net income (loss) $ $ $ $ 2,611 (5,594) 1,073 (13,371) Basic income (loss) per common share: Income (loss) from $ $ $ $ continuing operations 0.05 (0.12) 0.02 (0.26) Income from discontinued - 0.01 - 0.01 operations Net income (loss) $ $ $ $ 0.05 (0.11) 0.02 (0.25) Diluted income (loss) per common share: Income (loss) from $ $ $ $ continuing operations 0.05 (0.12) 0.02 (0.26) Income from discontinued - 0.01 - 0.01 operations Net income (loss) $ $ $ $ 0.05 (0.11) 0.02 (0.25) Weighted-average shares outstanding used in computing income (loss) per common share: Basic 49,315 49,615 49,161 52,692 Diluted 50,925 49,615 50,175 52,692 WEBMD HEALTH CORP. CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION (In thousands, unaudited) Three Months Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 Revenue Public portal advertising and $ $ $ $ sponsorship 105,783 93,744 199,221 181,520 Private portal services 19,534 18,924 38,858 38,095 $ $ $ $ 125,317 112,668 238,079 219,615 Earnings before interest, taxes, non-cash and other items ("Adjusted $ $ $ $ EBITDA") (a) 29,241 14,238 50,530 25,489 Interest, taxes, non-cash and other items (b) Interest income 17 34 38 45 Interest expense (5,832) (5,832) (11,664) (11,668) Income tax (provision) benefit (1,603) 2,649 (1,829) 6,402 Depreciation and amortization (6,635) (6,713) (13,488) (13,643) Non-cash stock-based (11,224) (9,381) (21,161) (26,281) compensation Gain on investments - - - 8,074 Other expense (1,353) (1,097) (1,353) (2,297) Income (loss) from continuing 2,611 (6,102) 1,073 (13,879) operations Income from discontinued - 508 - 508 operations, net of tax Net income (loss) $ $ $ $ 2,611 (5,594) 1,073 (13,371) (a) See Annex A-Explanation of Non-GAAP Financial Measures. (b) Reconciliation of Adjusted EBITDA to net income (loss). WEBMD HEALTH CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, 2013 December 31, 2012 (unaudited) Assets Cash and cash equivalents $ $ 1,026,139 991,835 Accounts receivable, net 103,793 106,622 Prepaid expenses and other 17,520 13,882 current assets Deferred tax assets 10,232 10,328 Total current assets 1,157,684 1,122,667 Property and equipment, net 61,223 66,604 Goodwill 202,104 202,104 Intangible assets, net 14,970 16,105 Deferred tax assets 52,711 56,039 Other assets 24,182 27,106 Total Assets $ $ 1,512,874 1,490,625 Liabilities and Stockholders' Equity Accrued expenses $ $ 53,338 64,256 Deferred revenue 98,325 92,176 Liabilities of discontinued 1,506 1,506 operations Total current liabilities 153,169 157,938 2.25% convertible notes due 400,000 400,000 2016 2.50% convertible notes due 400,000 400,000 2018 Other long-term liabilities 22,498 22,698 Stockholders' equity 537,207 509,989 Total Liabilities and $ $ Stockholders' Equity 1,512,874 1,490,625 WEBMD HEALTH CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Six Months Ended June 30, 2013 2012 Cash flows from operating activities: Net income (loss) $ 1,073 $ (13,371) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Income from discontinued operations, - (508) net of tax Depreciation and amortization 13,488 13,643 Non-cash interest, net 2,163 2,163 Non-cash stock-based compensation 21,161 26,281 Deferred income taxes 856 (6,870) Gain on investments - (8,074) Changes in operating assets and liabilities: Accounts receivable 2,829 24,501 Prepaid expenses and other, net (3,060) (4,469) Accrued expenses and other (10,665) (9,128) long-term liabilities Deferred revenue 6,149 1,230 Net cash provided by 33,994 25,398 operating activities Cash flows from investing activities: Proceeds received from ARS option - 9,269 Purchases of property and equipment (7,367) (16,606) Net cash used in investing (7,367) (7,337) activities Cash flows from financing activities: Proceeds from exercise of stock options 10,340 816 Cash used for withholding taxes due on (1,745) (1,958) stock-based awards Purchases of treasury stock (1,281) (173,910) Excess tax benefit on stock-based 363 - awards Net cash provided by (used 7,677 (175,052) in) financing activities Net increase (decrease) in cash and cash 34,304 (156,991) equivalents Cash and cash equivalents at beginning 991,835 1,121,217 of period Cash and cash equivalents at end of $ 1,026,139 $ 964,226 period WebMD Health Corp. Financial Guidance for the Year Ending December 31, 2013 (In millions, except per share amounts) Guidance Range Revenue $ 485.0 $ 505.0 Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") $ 100.0 $ 110.0 (a) Interest, taxes, non-cash and other items (b) Interest expense, net (23.0) (23.0) Depreciation and amortization (28.0) (27.0) Non-cash stock-based compensation (39.0) (37.0) Other expense (c) (1.4) (1.4) Pre-tax income 8.6 21.6 Income tax provision (5.6) (10.6) Net income $ 3.0 $ 11.0 Net income per share: Basic $ 0.06 $ 0.22 Diluted $ 0.06 $ 0.21 Weighted-average shares outstanding used in computing per share amounts: Basic 50.0 50.0 Diluted 52.0 52.0 (a) See Annex A - Explanation of Non-GAAP Financial Measures (b) Reconciliation of Adjusted EBITDA to Net Income (c) Represents severance expense for the Company's former Chief Executive Officer Additional information regarding forecast for the quarter ending September 30, 2013: - Revenue is forecasted to be in excess of$128 million - Adjusted EBITDA as a percentage of revenue is forecasted to be in excess of 22% - Net income as a percentage of revenue is forecasted to be approximately 3% Additional information regarding full year forecast: - The distribution of the annual revenue is expected to be approximately 83% public portals advertising and sponsorship and 17% private portal licensing. Quarterly revenue distributions may vary from this annual estimate. - Convertible Notes are not expected to be dilutive for the full year or any quarter. The above guidance does not include the impact, if any, of future deployment of capital for items such as share repurchases or acquisitions, gains or losses from discontinued operations, or other non-recurring, one-time or unusual items. ANNEX A Explanation of Non-GAAP Financial Measures The accompanying WebMD Health Corp. press release and attachments include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measures represent earnings before interest, taxes, non-cash and other items (which we refer to as "Adjusted EBITDA") and related per share amounts. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for net income or loss calculated in accordance with GAAP (referred to below as "net income"). The attachments to the press release include reconciliations of non-GAAP financial measures to GAAP financial measures. 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: oDepreciation 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. oStock-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, 2013 2012 2013 2012 Non-cash stock-based compensation included in: Cost of operations $ $ $ 3,341 $ 4,630 1,471 1,873 Sales and marketing $ $ $ 4,520 $ 4,465 1,997 2,304 General and administrative $ $ $ 13,300 $ 17,186 7,756 5,204 oInterest Income and Expense. Interest income is associated with the level of marketable debt securities and other interest bearing accounts in which we invest, and interest expense is related to our company's capital structure (including non-cash interest expense relating to our convertible notes). Interest income and expense varies over time due to a variety of financing transactions and due to acquisitions and divestitures that we have entered into or may enter into in the future. We have, in the past, issued convertible debentures, repurchased shares in cash tender offers and repurchased shares and convertible debentures through other repurchase transactions, and completed the divestiture of certain businesses. We exclude interest income and interest expense from Adjusted EBITDA (i) because these items are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different capital structures. Investors should note that interest income and expense will recur in future periods. The following provides detail regarding the components of interest expense of our convertible notes: Three Months Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 Non-cash interest expense 2.50% Convertible Notes $ 452 $ 452 $ 904 $ 904 2.25% Convertible Notes $ 629 $ 629 $ 1,259 $ 1,259 Cash interest expense 2.50% Convertible Notes $ 2,500 $ 2,500 $ 5,000 $ 5,000 2.25% Convertible Notes $ 2,250 $ 2,250 $ 4,500 $ 4,500 oIncome 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. oOther Items. We engage in other activities and transactions that can impact our net income. In recent periods, these other items have included, but were not limited to: (i) gain or loss on investments; (ii) a restructuring charge; and (iii) severance expense. We exclude these other items from Adjusted EBITDA because we believe these activities or transactions are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that some of these other items may recur in future periods. SOURCE WebMD Health Corp. Website: http://www.wbmd.com Contact: Investors: Risa Fisher, 212-624-3817, email@example.com, Kate Hahn, 212-624-3760, firstname.lastname@example.org
WebMD Announces Second Quarter Financial Results
Press spacebar to pause and continue. Press esc to stop.