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WebMD Reports Strong Third Quarter Revenue and Earnings Growth

NEW YORK, Nov. 1, 2016 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the three months ended September 30, 2016.

"We are pleased to report third quarter results around the high end of our expectations and we remain well positioned to deliver strong fourth quarter and full year performance," said Steve Zatz, Chief Executive Officer, WebMD.  "WebMD continues to demonstrate the value that we bring to our customers across both our professional and consumer platforms."

Financial Highlights
For the three months ended September 30, 2016:

Balance Sheet Highlights
As of September 30, 2016, WebMD had: approximately $1.04 billion in investments and cash and cash equivalents; $1.06 billion in aggregate principal amount of convertible notes outstanding; and approximately 38.7 million shares of its common stock outstanding (including approximately 600 thousand unvested shares of restricted stock).

During the third quarter, WebMD used $22.4 million in cash to repurchase approximately 432 thousand shares of its common stock under its stock repurchase program. As of September 30, 2016, approximately $47 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 third quarter of 2016 averaged 184 million unique users per month, generating 3.84 billion page views for the quarter, representing decreases of 11% and 4% in users and page views, respectively, when compared to the prior year period.

"During the third quarter, we achieved 15% advertising revenue growth despite a 4% decline in page views, demonstrating that trends in our aggregate traffic and our advertising revenue are not correlated to one another," said Dr. Zatz. "We are able to achieve these results because the majority of our advertising revenue is related to the highly targeted audiences that are of greatest value to our customers." 

Financial Guidance
Today, WebMD updated its 2016 financial guidance.

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

For the fourth quarter of 2016, WebMD expects:

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.com, Medscape.com, MedicineNet.com, eMedicineHealth.com, RxList.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


Nine Months Ended






September 30,


September 30,






2016


2015


2016


2015














Revenue




$       171,438


$       152,607


$     497,574


$     444,270


Cost of operations




65,458


59,552


193,759


177,836


Sales and marketing




35,264


32,850


104,634


97,896


General and administrative




20,005


22,942


67,744


67,397


Depreciation and amortization




7,912


7,266


23,071


23,103


Interest income




1,034


10


1,607


36


Interest expense




7,065


5,681


17,430


18,024


Loss on convertible notes


-


2,058


-


2,058


Gain on investments


-


-


-


139


Other expense


1,712


-


1,712


4,100














Income before income tax provision


35,056


22,268


90,831


54,031


     Income tax provision


13,438


9,080


35,715


17,468


Net income


$         21,618


$         13,188


$       55,116


$       36,563


























Net income per common share:










     Basic


$             0.57


$             0.36


$           1.46


$           1.00


     Diluted


$             0.47


$             0.32


$           1.22


$           0.89














Weighted-average shares outstanding used in 









     computing income per common share: 










     Basic


38,103


36,721


37,804


36,606


     Diluted 


55,845


49,958


53,836


49,912


 

 

WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

 (In thousands, unaudited)



























Three Months Ended


Nine Months Ended






September 30,


September 30,






2016


2015


2016


2015


Revenue










Advertising and sponsorship










     Biopharma and medical device


$      107,048


$        89,870


$      296,353


$      251,692


     OTC, CPG and other


29,026


28,850


93,907


89,047






136,074


118,720


390,260


340,739


Health services


28,247


27,460


85,134


83,223


Information services


7,117


6,427


22,180


20,308






$      171,438


$      152,607


$      497,574


$      444,270


























Net income


$        21,618


$        13,188


$        55,116


$        36,563














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










     Interest income


(1,034)


(10)


(1,607)


(36)


     Interest expense


7,065


5,681


17,430


18,024


     Income tax provision


13,438


9,080


35,715


17,468


     Depreciation and amortization 


7,912


7,266


23,071


23,103


     Non-cash stock-based compensation


4,638


9,142


21,038


24,731


     Loss on convertible notes


-


2,058


-


2,058


     Gain on investments


-


-


-


(139)


     Other expense


1,712


-


1,712


4,100














Earnings before interest, taxes, non-cash










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


$        55,349


$        46,405


$      152,475


$      125,872














(a) Reconciliation of net income to Adjusted EBITDA.






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






 

 

WEBMD HEALTH CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (In thousands)










September 30,


December 31,




2016


2015




(unaudited)



Assets





Cash and cash equivalents


$            88,600


$        641,165

Accounts receivable, net


153,255


174,313

Investments


949,488


-

Prepaid expenses and other current assets


17,972


18,998


Total current assets


1,209,315


834,476







Property and equipment,  net


84,929


81,027

Goodwill


202,980


202,980

Intangible assets, net


8,554


10,894

Deferred tax assets, net


8,984


15,694

Other assets


8,497


10,852

Total Assets


$       1,523,259


$     1,155,923







Liabilities and Stockholders' Equity





Accrued expenses


$            65,892


$          80,664

Deferred revenue


102,251


102,715

2.25% convertible notes due 2016, net


-


102,523


Total current liabilities


168,143


285,902







2.50% convertible notes due 2018, net


397,620


396,281

1.50% convertible notes due 2020, net


295,140


294,266

2.625% convertible notes due 2023, net


350,849


-

Other long-term liabilities


28,965


23,246







Stockholders' equity


282,542


156,228







Total Liabilities and Stockholders' Equity


$       1,523,259


$     1,155,923

 

 

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)























Nine Months Ended







September 30,







2016


2015

Cash flows from operating activities:






Net income


$           55,116


$        36,563


Adjustments to reconcile net income to net cash provided by






  operating activities:







Depreciation and amortization


23,071


23,103



Non-cash interest, net


2,827


3,276



Non-cash stock-based compensation


21,038


24,731



Deferred income taxes


6,632


(7,246)



Loss on convertible notes


-


2,058



Gain on investments


-


(139)



Changes in operating assets and liabilities:








Accounts receivable


21,058


(10,201)




Prepaid expenses and other, net


2,747


(5,692)




Accrued expenses and other long-term liabilities


(9,748)


(4,555)




Deferred revenue


(464)


15,280





Net cash provided by operating activities


122,277


77,178










Cash flows from investing activities:






Purchases of property and equipment


(24,449)


(25,638)


Purchase of investments


(948,078)


-


Partial redemption of cost-method investment


1,193


-


Proceeds from sale of investments


-


139





Net cash used in investing activities


(971,334)


(25,499)










Cash flows from financing activities:






Proceeds from exercise of stock options


52,702


15,185


Cash used for withholding taxes due on stock-based awards


(7,705)


(3,836)


Net proceeds from issuance of convertible notes


350,394


-


Maturity of convertible notes


(102,682)


(151,038)


Purchases of treasury stock 


(22,447)


(28,406)


Excess tax benefit on stock-based awards


26,230


21,972





Net cash provided by (used in) financing activities


296,492


(146,123)

Net decrease in cash and cash equivalents


(552,565)


(94,444)

Cash and cash equivalents at beginning of period


641,165


706,776

Cash and cash equivalents at end of period


$           88,600


$      612,332

 

 

WEBMD HEALTH CORP.

NET INCOME PER COMMON SHARE

 (In thousands, except per share data, unaudited)



























Three Months Ended


Nine Months Ended





September 30,


September 30,





2016


2015


2016


2015













Numerator:










Net income - Basic


$       21,618


$       13,188


$       55,116


$       36,563



Interest expense on 1.50% convertible notes, net of tax


878


864


2,635


2,592



Interest expense on 2.50% convertible notes, net of tax


1,827


1,797


5,480


5,392



Interest expense on 2.25% convertible notes, net of tax


-


-


457


-



Interest expense on 2.625% convertible notes, net of tax


1,675


-


2,235


-


Net income - Diluted


$       25,998


$       15,849


$       65,923


$       44,547
























Denominator:










Weighted-average shares - Basic


38,103


36,721


37,804


36,606



Stock options and restricted stock


1,709


1,338


1,824


1,407



1.50% convertible notes


5,694


5,694


5,694


5,694



2.50% convertible notes


6,205


6,205


6,205


6,205



2.25% convertible notes


-


-


471


-



2.625% convertible notes


4,134


-


1,838


-


Adjusted weighted-average shares after assumed conversions - Diluted


55,845


49,958


53,836


49,912
























Net income per common share:











Basic


$           0.57


$            0.36


$           1.46


$           1.00



Diluted


$           0.47


$            0.32


$           1.22


$           0.89

 

 













WEBMD HEALTH CORP.

FINANCIAL GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2016

(In millions, except per share amounts)
















Nine Months Ended


Three Months Ending


Year Ending




September 30, 2016


December 31, 2016


December 31, 2016




Actuals


Guidance Range


Guidance Range

Revenue












Advertising and sponsorship












Biopharma and medical device


$                    296.4


$   129.6


$   134.6


$   426.0


$     431.0


OTC, CPG and other


93.9


37.1


40.1


131.0


134.0




390.3


166.7


174.7


557.0


565.0


Health services


85.1


26.9


27.9


112.0


113.0


Information services


22.2


6.8


7.8


29.0


30.0




$                    497.6


$   200.4


$   210.4


$   698.0


$     708.0













Net income


$                      55.1


$     31.7


$     37.2


$     86.8


$       92.3













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











     Interest expense, net


15.8


6.2


6.2


22.0


22.0

     Income tax provision


35.7


18.8


22.8


54.5


58.5

     Depreciation and amortization


23.1


8.4


7.4


31.5


30.5

     Non-cash stock-based compensation


21.1


8.4


6.9


29.5


28.0

     Other expense


1.7


-


-


1.7


1.7













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

$                    152.5


$     73.5


$     80.5


$   226.0


$     233.0













Income per share:











     Basic


$                      1.46


$     0.83


$     0.97


$     2.29


$       2.43

     Diluted (c)


$                      1.22


$     0.65


$     0.74


$     1.88


$       1.97













Calculation of income per share:












Net income (numerator for basic income per share)


$                      55.1


$     31.7


$     37.2


$     86.8


$       92.3


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












   1.50% convertible notes


2.6


0.9


0.9


3.5


3.5


   2.50% convertible notes


5.5


1.8


1.8


7.3


7.3


   2.25% convertible notes


0.5


-


-


0.5


0.5


   2.625% convertible notes


2.2


1.7


1.7


3.9


3.9


Numerator for diluted income per share


$                      65.9


$     36.1


$     41.6


$   102.0


$     107.5














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

37.8


38.2


38.4


37.9


38.0


Stock options and restricted stock


1.8


1.2


1.5


1.6


1.8


Weighted average shares issuable upon conversion of:












   1.50% convertible notes


5.7


5.7


5.7


5.7


5.7


   2.50% convertible notes


6.2


6.2


6.2


6.2


6.2


   2.25% convertible notes


0.5


-


-


0.4


0.4


   2.625% convertible notes


1.8


4.1


4.1


2.4


2.4


Denominator for diluted income per share


53.8


55.4


55.9


54.2


54.5





































(a) Reconciliation of net income to Adjusted EBITDA







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







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














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 Quarter and 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 guidance ranges.  The following table contains the approximate level of net income for the fourth 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)

$         6.1


$        12.4


$        18.1


$        24.4


$        49.7


$        55.6


$        72.6
















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  39.5 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").  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:










Three Months Ended


Nine Months Ended










September 30,


September 30,










2016

2015


2016

2015
















Non-cash stock-based compensation included in:











Cost of operations


$    1,277

$    1,370


$    3,707

$    3,791






Sales and marketing


$    1,351

$    1,968


$    4,295

$    5,099






General and administrative


$    2,010

$    5,804


$  13,036

$  15,841
















 

 










Three Months Ended


Nine Months Ended










September 30,


September 30,










2016

2015


2016

2015
















Non-cash interest expense











2.25% Convertible Notes


$           —

$       282


$         159

$    1,062






2.50% Convertible Notes


$         446

$       447


$      1,339

$    1,339






1.50% Convertible Notes


$         292

$       291


$         875

$       875






2.625% Convertible Notes


$         339

$         —


$         454

$         —





 

Cash interest expense












2.25% Convertible Notes


$           —

$    1,036


$         577

$    3,873






2.50% Convertible Notes


$      2,500

$    2,500


$      7,500

$    7,500






1.50% Convertible Notes


$      1,125

$    1,125


$      3,375

$    3,375






2.625% Convertible Notes


$      2,363

$         —


$      3,151

$         —
















 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/webmd-reports-strong-third-quarter-revenue-and-earnings-growth-300355301.html

SOURCE WebMD Health Corp.

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