Total Revenue Increased 15%; Advertising Revenue Increased 20%
NEW YORK, Nov. 3 /PRNewswire-FirstCall/ -- WebMD Health Corp. (Nasdaq: WBMD),
the leading source of health information, today announced financial results
for the three months ended September 30, 2009.
"Our reported results mark another quarter of strong financial and operating
performance," said Wayne Gattinella, President and CEO. "In the face of a
generally challenging media environment, WebMD continues to expand its
audience, revenue and operating margins. We are seeing strong momentum in our
business and are excited about the opportunities for growth ahead of us."
Financial Summary
Revenue for the third quarter was $111.6 million, compared to $96.8 million in
the prior year period, an increase of 15%. Earnings before interest, taxes,
non-cash and other items ("Adjusted EBITDA") for the third quarter was $33.1
million or $0.56 per share, compared to $25.5 million or $0.43 per share in
the prior year period, an increase of 30%.
Income from continuing operations for the third quarter was $12.6 million or
$0.21 per share, compared to $10.0 million or $0.17 per share in the prior
year period. Income from discontinued operations was $0.2 million in the third
quarter, compared to $0.8 million in the prior year period. Net income for the
third quarter was $12.8 million or $0.21 per share, compared to $10.8 million
or $0.18 per share in the prior year period.
WebMD's print directory business, Little Blue Book, was sold on September 30,
2009 and is reflected as a discontinued operation in the Company's financial
statements for current and prior periods.
Public portal advertising and sponsorship revenue was $89.4 million for the
third quarter, compared to $74.7 million in the prior year period, an increase
of 20%. Traffic to the WebMD Health Network continued to grow strongly,
reaching an average of 59.2 million unique users per month and total traffic
of 1.4 billion page views during the third quarter, increases of 19% and 27%,
respectively, from a year ago. In the third quarter, 1.6 million continuing
medical education (CME) programs were completed on the WebMD Professional
Network, an increase of 25% from the prior year period.
Private portal services revenue was $22.2 million for the third quarter
compared to $22.1 million in the prior year period. The revenue and base of
large employers and health plans utilizing WebMD's private Health and Benefits
portals during the third quarter were comparable with the prior year period.
WebMD's third quarter results released today do not reflect the recently
completed merger with HLTH Corporation, its former parent company, which was
completed after the end of the quarter.
WebMD Launches New Consumer Health Portal in the UK
WebMD launched its first consumer health portal outside the U.S. in October.
WebMD partnered with Boots, the leading pharmacy and health and beauty
retailer in the UK, to launch a new health portal designed expressly for the
health and wellness needs of the UK consumer. The new co-branded Boots WebMD
site at www.Boots.WebMD.com features 44 condition and healthy living centers,
daily health and wellness news, interactive health tools, WebMD's symptom
checker, specialized health search, health videos and interactive slide shows.
Mr. Gattinella said, "The site launched at the end of October to much fanfare
and very positive initial user feedback in the UK. There is a large
opportunity in the UK with over 20% of the estimated $30 billion of annual
advertising expenditures in the UK spent online."
WebMD Launches Medscape Mobile for Physicians
In July, WebMD launched Medscape Mobile, WebMD's first mobile application for
physicians. Medscape Mobile provides the most comprehensive drug information,
clinical reference tools, medical news and continuing medical education on a
mobile device. It is the only mobile application to deliver specialty-specific
news and medical education, leveraging Medscape's assets and award winning
professional editorial team. Development is underway to launch new product
enhancements and additional mobile platforms including BlackBerry® later this
year. Mr. Gattinella said, "Medscape Mobile continues to rank at the top of
the App Store for medical applications, with already over 200,000 downloads
since launching three months ago."
WebMD Launches Healthy Pets
In October, WebMD launched the WebMD Healthy Pets channel on WebMD.com, which
provides pet owners with the latest health and wellness information to help
their pets live healthier lives. WebMD Healthy Pets provides
veterinarian-reviewed information on pet diet and nutrition, behavior and
training, and preventive care. More than 75% of WebMD users are pet owners who
also care for the health of their pets and nearly $700 million is spent
annually on marketing pet supplies and services in the U.S. Mr. Gattinella
said, "We continue to invest in new markets that have the opportunity to
significantly expand our user base and penetrate new areas of revenue
opportunity for the future."
Merger with HLTH Completed
As previously announced, WebMD and HLTH completed their merger on October 23,
2009. The applicable accounting treatment for the merger results in HLTH being
treated as the acquiring entity and, as a result, the pre-acquisition
consolidated financial statements of HLTH will become the historical financial
statements of WebMD beginning with reporting for the fourth quarter of 2009.
WebMD is furnishing, as Exhibit 99.5 to the Current Report on Form 8-K filed
with the SEC by WebMD today, a copy of HLTH's financial information for the
third quarter of 2009.
As of the merger closing date of October 23, 2009, WebMD had approximately $1
billion in cash and investments and had outstanding approximately $515 million
in aggregate principal amount of convertible notes.
Financial Guidance
The Company reaffirmed its financial guidance for the fourth quarter and
calendar year 2009 today and narrowed the ranges for its anticipated revenue
and Adjusted EBITDA by raising the low end of those ranges. This financial
guidance reflects the prior financial guidance for the Company's former
parent, HLTH Corporation, whose historical financial statements are required
to be adopted by WebMD as a result of the merger.
For 2009, WebMD expects:
-- Total revenue to be approximately $430 million to $440 million, an
increase of 15% to 18% over 2008;
-- Adjusted EBITDA to be approximately $106 million to $111 million, an
increase of 24% to 25% over 2008;
-- Income from continuing operations to be approximately $11 million to
$14
million, or $0.22 to $0.27 per share.
These amounts represent growth of approximately 19% to 23% in public portal
advertising and sponsorship revenue and approximately 2% in private portal
services revenue.
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 third 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.
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: guidance on our future
financial results and other projections or measures of our future performance;
market opportunities and our ability to capitalize on them; the benefits
expected from new or updated products or services and from other potential
sources of additional revenue; and expectations regarding the market for
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 our products and services; our 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®, Medscape®, eMedicine®, MedicineNet®, RxList®, Subimo®, Medsite®, and
Summex®, 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 Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue $111,568 $96,797 $300,463 $263,451
Cost of operations 41,965 34,225 117,759 97,120
Sales and marketing 26,265 26,021 80,623 76,068
General and administrative 15,961 14,774 45,826 42,465
Depreciation and
amortization 6,988 7,056 20,729 20,815
Interest income 834 2,616 2,733 8,419
Impairment of auction
rate securities - - - 27,406
--- --- --- ------
Income from continuing
operations before income
tax provision 21,223 17,337 38,259 7,996
Income tax provision 8,622 7,375 15,469 15,308
----- ----- ------ ------
Income (loss) from
continuing operations 12,601 9,962 22,790 (7,312)
Income (loss) from
discontinued
operations, net of tax 190 804 (5,100) 1,095
--- --- ------ -----
Net income (loss) $12,791 $10,766 $17,690 $(6,217)
======= ======= ======= =======
Basic income (loss)
per common share:
Income (loss) from
continuing operations $0.22 $0.17 $0.39 $(0.13)
Income (loss) from
discontinued
operations 0.00 0.02 (0.09) 0.02
---- ---- ----- ----
Net income (loss) $0.22 $0.19 $0.30 $(0.11)
===== ===== ===== ======
Diluted income (loss)
per common share:
Income (loss) from
continuing operations $0.21 $0.17 $0.39 $(0.13)
Income (loss) from
discontinued
operations 0.00 0.01 (0.09) 0.02
---- ---- ----- ----
Net income (loss) $0.21 $0.18 $0.30 $(0.11)
===== ===== ===== ======
Weighted-average shares
outstanding used in computing
basic and diluted net
income (loss) per common
share:
Basic 57,777 57,770 57,676 57,699
====== ====== ====== ======
Diluted 58,844 59,111 58,445 57,699
====== ====== ====== ======
WEBMD HEALTH CORP.
CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share data, unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue
Public portal advertising
and sponsorship $89,414 $74,658 $232,695 $197,523
Private portal services 22,154 22,139 67,768 65,928
------ ------ ------ ------
$111,568 $96,797 $300,463 $263,451
======== ======= ======== ========
Earnings before interest,
taxes, non-cash and other items
("Adjusted EBITDA") (a) $33,123 $25,467 $75,029 $60,191
------- ------- ------- -------
Adjusted EBITDA per basic
common share $0.57 $0.44 $1.30 $1.04
----- ----- ----- -----
Adjusted EBITDA per
diluted common share $0.56 $0.43 $1.28 $1.04
----- ----- ----- -----
Interest, taxes, non-cash and
other items (b)
Interest income 834 2,616 2,733 8,419
Depreciation and amortization (6,988) (7,056) (20,729) (20,815)
Non-cash advertising - (178) (1,753) (1,736)
Non-cash stock-based
compensation (5,746) (3,512) (17,021) (10,657)
Impairment of auction
rate securities - - - (27,406)
Income tax provision (8,622) (7,375) (15,469) (15,308)
------ ------ ------- -------
Income (loss) from
continuing operations 12,601 9,962 22,790 (7,312)
Income (loss) from
discontinued
operations, net of tax 190 804 (5,100) 1,095
--- --- ------ -----
Net income (loss) $12,791 $10,766 $17,690 $(6,217)
======= ======= ======= =======
Basic income (loss) per
common share:
Income (loss) from
continuing operations $0.22 $0.17 $0.39 $(0.13)
Income (loss) from
discontinued operations 0.00 0.02 (0.09) 0.02
---- ---- ----- ----
Net income (loss) $0.22 $0.19 $0.30 $(0.11)
===== ===== ===== ======
Diluted income (loss) per
common share:
Income (loss) from
continuing operations $0.21 $0.17 $0.39 $(0.13)
Income (loss) from
discontinued operations 0.00 0.01 (0.09) 0.02
---- ---- ----- ----
Net income (loss) $0.21 $0.18 $0.30 $(0.11)
===== ===== ===== ======
Weighted-average shares
outstanding used in computing
per share amounts:
Basic 57,777 57,770 57,676 57,699
====== ====== ====== ======
Diluted 58,844 59,111 58,445 57,699
====== ====== ====== ======
(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, unaudited)
September 30, 2009 December 31, 2008
------------------ -----------------
ASSETS
Current assets:
Cash and cash equivalents $275,250 $191,659
Accounts receivable, net 87,072 93,082
Current portion of prepaid
advertising - 1,753
Other current assets 9,286 11,358
Assets of discontinued
operations - 12,575
--- ------
Total current assets 371,608 310,427
Investments 126,564 133,563
Property and equipment, net 52,286 54,165
Goodwill 208,967 208,967
Intangible assets, net 21,416 26,237
Other assets 13,259 22,573
------ ------
$794,100 $755,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $31,760 $31,241
Deferred revenue 83,861 79,613
Due to HLTH 1,378 427
Liabilities of discontinued
operations - 2,599
--- -----
Total current liabilities 116,999 113,880
Other long-term liabilities 7,539 8,334
Stockholders' equity 669,562 633,718
------- -------
$794,100 $755,932
======== ========
WEBMD HEALTH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Nine Months Ended September 30,
--------------------------------
2009 2008
---- ----
Cash flows from operating activities:
Net income (loss) $17,690 $(6,217)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Loss (income) from discontinued
operations, net of tax 5,100 (1,095)
Depreciation and amortization 20,729 20,815
Non-cash advertising 1,753 1,736
Non-cash stock-based
compensation 17,021 10,657
Deferred and other income
taxes 14,835 14,977
Impairment of auction rate
securities - 27,406
Changes in operating assets
and liabilities:
Accounts receivable 6,010 6,275
Other assets (587) (2,651)
Accrued expenses and other
long-term liabilities (276) (286)
Due to HLTH 951 563
Deferred revenue 4,248 5,367
----- -----
Net cash provided by
continuing operations 87,474 77,547
Net cash provided by
discontinued operations 728 3,205
--- -----
Net cash provided by
operating activities 88,202 80,752
Cash flows from investing activities:
Proceeds from maturities and
sales of available-for-sale
securities 1,800 43,300
Purchases of available-for-sale
securities - (127,900)
Purchases of property and equipment (14,131) (15,014)
Cash received from sale of
businesses, net of fees 2,840 1,133
----- -----
Net cash used in
continuing operations (9,491) (98,481)
Net cash used in
discontinued operations (8) (40)
-- ---
Net cash used in investing
activities (9,499) (98,521)
Cash flows from financing activities:
Proceeds from issuance of
common stock 4,823 3,453
Tax benefit on stock-based awards 65 315
-- ---
Net cash provided by
financing activities 4,888 3,768
Net increase (decrease) in cash
and cash equivalents 83,591 (14,001)
Cash and cash equivalents at
beginning of period 191,659 213,753
------- -------
Cash and cash equivalents at end
of period $275,250 $199,752
======== ========
FINANCIAL GUIDANCE SUMMARY
WebMD Health Corp
2009 Financial Guidance
(in millions, except per share amounts)
Quarterly period ending,
------------------------
March June September December
31, 2009 30, 2009 30, 2009 31, 2009
Actuals Actuals Actuals Guidance Range
------- ------- ------- --------------
Revenue $90.3 $98.6 $111.6 $129.5 $139.5
===== ===== ====== ====== ======
Earnings before interest,
taxes, non-cash and other
items ("Adjusted EBITDA")
(a) (d) $15.3 $20.0 $30.5 $40.0 $45.0
Adjusted EBITDA per
diluted share $0.34 $0.43 $0.63 $0.68 $0.76
Interest, taxes, non-cash
and other items (b)
Interest income 2.3 2.0 1.8 1.5 2.0
Interest expense (6.5) (5.8) (5.5) (5.6) (5.6)
Depreciation and
amortization (7.1) (7.0) (7.1) (8.0) (7.5)
Non-cash stock-based
compensation (9.2) (9.4) (9.2) (9.5) (9.0)
Non-cash advertising (1.8) - - - -
Gain on repurchases of
convertible notes 6.6 3.5 - - -
Income tax benefit
(provision) (c) 1.2 (0.7) (5.4) (10.5) (13.8)
Other expenses (0.3) (0.6) (0.1) - -
---- ---- ---- ----- -----
Consolidated income from
continuing operations before
minority (non-controlling)
interest $0.5 $2.0 $5.0 $7.9 $11.1
==== ==== ==== ==== =====
Income (loss) from continuing
operations attributable
to Company
shareholders (e) $(0.2) $0.7 $2.9 $7.4 $10.1
===== ==== ==== ==== =====
Income (loss) from continuing
operations per share:
Basic $(0.00) $0.02 $0.06 $0.13 $0.18
Diluted $(0.00) $0.01 $0.05 $0.13 $0.17
Weighted-average shares
outstanding (f):
Basic 45.2 45.6 46.1 55.0 55.0
Diluted 45.2 46.7 48.6 59.0 59.0
Pro-forma share information (g)
Pro-forma consolidated
income from continuing
operations before minority
(non-controlling) interest
per share:
Basic $0.01 $0.04 $0.09 $0.14 $0.19
Diluted $0.01 $0.03 $0.08 $0.13 $0.18
Pro-forma Adjusted
EBITDA per diluted share $0.27 $0.35 $0.51 $0.66 $0.74
Pro-forma weighted-average
shares outstanding:
Basic 54.7 55.2 55.8 57.0 57.0
Diluted 56.2 57.1 59.4 61.0 61.0
Year Ending
December 31, 2009
Guidance Range
--------------
Revenue $430.0 $440.0
====== ======
Earnings before interest,
taxes, non-cash and other
items ("Adjusted EBITDA") (a) (d) $105.8 $110.8
Adjusted EBITDA per diluted share $2.12 $2.22
Interest, taxes, non-cash and
other items (b)
Interest income 7.6 8.1
Interest expense (23.4) (23.4)
Depreciation and amortization (29.2) (28.7)
Non-cash stock-based compensation (37.3) (36.8)
Non-cash advertising (1.8) (1.8)
Gain on repurchases of convertible
notes 10.1 10.1
Income tax benefit (provision) (c) (15.4) (18.7)
Other expenses (1.0) (1.0)
----- -----
Consolidated income from
continuing operations before minority
(non-controlling) interest $15.4 $18.6
===== =====
Income (loss) from continuing
operations attributable to Company
shareholders (e) $10.8 $13.5
===== =====
Income (loss) from continuing
operations per share:
Basic $0.23 $0.28
Diluted $0.22 $0.27
Weighted-average shares
outstanding (f):
Basic 48.0 48.0
Diluted 49.9 49.9
Pro-forma share information (g)
Pro-forma consolidated
income from continuing
operations before minority
(non-controlling) interest
per share:
Basic $0.28 $0.33
Diluted $0.26 $0.32
Pro-forma Adjusted EBITDA
per diluted share $1.81 $1.90
Pro-forma weighted-average
shares outstanding:
Basic 55.7 55.7
Diluted 58.4 58.4
WebMD and HLTH completed their merger on October 23, 2009. The applicable
accounting treatment for the merger results in HLTH being treated
as the acquiring entity and, as a result, the pre-acquisition
consolidated financial statements of HLTH will become the historical
financial statements of WebMD beginning with reporting for the fourth
quarter of 2009. The March, June and September 2009 quarterly
information presented above, reflect HLTH's historical financial
information, after adjustment for share and per share data based on the
merger exchange ratio. Also presented above is pro-forma share
information, presenting the effect of the merger as if it occurred as of
January 1, 2009.
(a) See Annex A - Explanation of Non-GAAP Financial Measures
(b) Reconciliation of Adjusted EBITDA to consolidated income from
continuing operations
(c) The income tax provision excludes any benefit relating to any
reversal in 2009 of the valuation allowance against deferred tax assets
(d) Includes HLTH expenses previously categorized as 'Corporate' of
$3.4, $3.2 and $2.6 for the March, June and September 2009 quarters,
respectively
(e) Represents income (loss) from continuing operations, net of minority
(non-controlling) interest of HLTH for periods prior to the merger
(f) Represents historical share information of HLTH, adjusted for the
.4444 merger exchange ratio
(g) Pro-forma weighted-average shares outstanding and related pro-forma
share information assumes the merger took place on January 1, 2009 as
follows:
- Decreasing shares outstanding for the elimination of WebMD's 48.1
million Class B shares which have been retired
- Increasing basic shares outstanding for HLTH's common shares which
have been converted to WebMD shares based on the .4444 merger
exchange ratio
- Increasing diluted shares outstanding for HLTH's stock options
which have been converted to WebMD options based on the .4444
merger exchange ratio
The above December 2009 quarter and full year guidance excludes a gain
related to the sale of our Porex business and a charge related to the
merger and other actions, which include severance and related expenses.
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 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 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 Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Non-cash stock-based compensation
included in:
Cost of operations $(1,743) $(997) $(4,921) $(2,930)
Sales and marketing $(1,948) $(1,215) $(5,499) $(3,602)
General and administrative $(2,055) $(1,300) $(6,601) $(4,125)
Income (loss) from
discontinued operations $85 $(63) $(89) $(118)
-- 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 was available only on various Newscorp
properties, primarily its television network and cable channels,
without
any cash cost to WebMD and expired this year. 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 and (iii) 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
$1,753 and $1,736 for the nine months ended September 30, 2009 and
2008,
respectively, and $178 for the three months ended September 30, 2008.
There were no non-cash advertising expenses for the three months ended
September 30, 2009.
-- 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 Provision (Benefit). WebMD maintains a valuation allowance
on a portion of its net operating loss carryforwards, the amount of
which may change from quarter to quarter based on factors that are not
directly related to WebMD's results for the quarter. The valuation
allowance is either reversed through the statement of operations or
additional paid-in capital. 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
provision
(benefit) from Adjusted EBITDA (i) because it believes that the income
tax provision (benefit) 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 provision (benefit)
will recur in future periods.
-- Other Items. WebMD engages in various 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 from Adjusted EBITDA.
SOURCE WebMD
Investors: Risa Fisher, +1-212-624-3817, rfisher@webmd.net; or Media: Kate
Hahn, +1-212-624-3760, khahn@webmd.net
