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WebMD Announces Fourth Quarter Financial Results
Feb 18, 2010 (03:02 PM EST)


Total Revenue Increased 25%; Advertising Revenue Increased 32%

WebMD Sees Strong Momentum Continuing in 2010

NEW YORK, Feb. 18 /PRNewswire-FirstCall/ -- WebMD Health Corp. (Nasdaq: WBMD), the leading source of health information, today announced financial results for the three months and year ended December 31, 2009.

For the three months ended December 31, 2009:

  • Revenue was $138.1 million, compared to $110.1 million in the prior year period, an increase of 25.4%.
  • Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") was $46.4 million, compared to $29.4 million in the prior year period, an increase of 58%.
  • Net income was $98.3 million or $1.39 per share, compared to $7.7 million or $0.11 per share in the prior year period.

“Our strong growth in the fourth quarter capped off a successful year for WebMD,” said Wayne Gattinella, President and CEO. “WebMD delivered ad revenue growth of 32% in the fourth quarter in the midst of a weak media environment where online U.S. display advertising was down an estimated 5% in 2009. As we look to 2010, we are excited by the momentum that we see in our business as we further establish the value of the WebMD franchise in the marketplace.”

Financial Summary

As previously announced, WebMD completed the merger with HLTH Corporation, its former parent company, on October 23, 2009. The current and historical financial information released today reflects the consummation of the merger. 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 became the historical financial statements of WebMD beginning with the closing of the merger on October 23, 2009.

Revenue for the fourth quarter was $138.1 million, compared to $110.1 million in the prior year period, an increase of 25.4%.

  • Public portal advertising and sponsorship revenue was $114.9 million for the fourth quarter, compared to $86.9 million in the prior year period, an increase of 32%. Traffic to the WebMD Health Network continued to grow, reaching an average of 62.5 million unique users per month and total traffic of 1.5 billion page views during the fourth quarter, increases of 16% and 17%, respectively, from a year ago. During the fourth quarter, 1.8 million continuing medical education (CME) programs were completed on the WebMD Professional Network, an increase of 19% from the prior year period.
  • Private portal services revenue was $23.2 million for both the fourth quarter of 2009 and 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 138 as compared to 134 a year ago.

Adjusted EBITDA for the fourth quarter was $46.4 million or $0.65 per share, compared to $29.4 million or $0.43 per share in the prior year period, an increase of 58%.

Consolidated income from continuing operations for the fourth quarter was $64.2 million, compared to $7.6 million in the prior year period. Consolidated income from continuing operations for the fourth quarter of 2009 includes a tax benefit of $58.6 million primarily related to the reversal of valuation allowances related to the anticipated future utilization of the Company’s net operating loss carryforwards. Consolidated income from continuing operations in the prior year period includes a tax benefit of $4.3 million related to a gain on the sale of a business unit.

Income from discontinued operations was $34.7 million in the fourth quarter, compared to $2.0 million in the prior year period. Income from discontinued operations for the fourth quarter of 2009 includes a net gain of $21.3 million on the sale of Porex with the balance of $13.4 million primarily related to adjustments of liability accruals associated with other divested businesses. Included in discontinued operations in the Company’s financial statements for current and prior periods are Little Blue Book, which was sold on September 30, 2009, and Porex, which was sold on October 19, 2009.

Net income for the fourth quarter was $98.3 million or $1.39 per share, compared to $7.7 million or $0.11 per share in the prior year period.

As of December 31, 2009, WebMD had $808 million in cash and investments and had approximately $515 million in aggregate principal amount of convertible notes outstanding.

2010 Financial Guidance  

The Company issued financial guidance for 2010 today.

“We enter 2010 with a healthy backlog of signed contracts as we experienced strong upfront buying at the end of 2009,” said Wayne Gattinella. “Coupled with our strong pipeline of potential new business, we are very enthusiastic about the year ahead.”

For 2010, WebMD expects:

  • Revenue to be approximately $510 million to $525 million, an increase of 16% to 20% over 2009;
  • Adjusted EBITDA to be approximately $150 million to $158 million, an increase of 33% to 40% over 2009; and
  • Income from continuing operations to be approximately $45 million to $53 million, or $0.68 to $0.80 per diluted share.  

These amounts represent growth of approximately 21% to 25% in public portal advertising and sponsorship revenue over 2009 and private portal services revenue consistent with 2009.

For the first quarter of 2010, WebMD expects:

  • Revenue to be in the range of $103 million to $106 million with Adjusted EBITDA representing approximately 21.5% to 22.5% of revenue.
  • Income from continuing operations is estimated to be in the range of 2% to 3.5% of 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 fourth 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 and health-focused publications. Approximately 60 million unique visitors access the WebMD Health Network each month.

The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, eMedicine, eMedicine Health, RxList and theHeart.org and drugs.com.

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 Ended     Years Ended    
                                         December 31,        December 31,    
                                         ------------        ------------    
                                        2009      2008      2009      2008 
                                        ----      ----      ----      ---- 
    
    Revenue                         $138,073  $110,071  $438,536  $373,462 
    Cost of operations                47,994    38,018   165,753   135,138 
    Sales and marketing               31,478    30,012   112,101   106,080 
    General and administrative        23,802    21,933    89,620    88,053 
    Depreciation and amortization      6,992     7,233    28,185    28,410 
    Interest income                    3,089     5,916     9,149    35,300 
    Interest expense                   5,657     6,682    23,515    26,428 
    Severance and other    
     transaction expenses             11,066       782    11,066     6,941 
    Restructuring                          -     7,416         -     7,416 
    Gain on repurchases of                                         
     convertible notes                     -         -    10,120         - 
    Gain on sale of EBS                                            
     Master LLC                            -         -         -   538,024 
    Impairment of auction                                          
     rate securities                       -         -         -    60,108 
    Other (expense) income, net         (425)      640    (1,369)      992 
                                    --------  --------  --------  --------
    Income from continuing                                         
     operations before income 
     tax (benefit) provision          13,748     4,551    26,196   489,204 
      Income tax (benefit)                                         
       provision                     (50,413)   (3,026)  (45,491)   26,638 
      Equity in earnings                                           
       of EBS Master LLC                   -         -         -     4,007 
                                    --------  --------  --------  --------
    Consolidated income from 
     continuing operations            64,161     7,577    71,687   466,573 
      Consolidated income                                          
       from discontinued                                           
       operations, net of tax         34,659     2,041    49,354    94,682 
                                    --------  --------  --------  --------
    Consolidated net income 
     inclusive of 
     noncontrolling interest          98,820     9,618   121,041   561,255 
      Income attributable to 
       noncontrolling interest          (524)   (1,961)   (3,705)   (1,032)
                                    --------  --------  --------  --------
    Net income attributable 
     to Company stockholders         $98,296    $7,657  $117,336  $560,223 
                                    ========   ======== ========  ========
                                                                   
    Amounts attributable to
     Company stockholders:         
      Income from continuing          
       operations                    $63,637    $5,611   $67,018  $465,725 
      Income from 
       discontinued operations        34,659     2,046    50,318    94,498 
                                    --------  --------  --------  --------
    Net income attributable 
     to Company stockholders         $98,296    $7,657  $117,336  $560,223 
                                    ========   ======== ========  ======== 
                                                                   
    Basic  income per common share:                                
      Income from continuing           
       operations                      $1.19     $0.08     $1.40     $5.99 
      Income from 
       discontinued operations          0.65      0.03      1.05      1.22 
                                    --------  --------  --------  --------
    Net income attributable to                                               
     Company stockholders              $1.84     $0.11     $2.45     $7.21 
                                    ========   ======== ========  ========
                                                                   
    Diluted income per common share:                  
      Income from 
       continuing operations           $0.92     $0.08     $1.21     $4.92 
      Income from                                                  
       discontinued operations          0.47      0.03      0.86      0.96 
                                    --------  --------  --------  --------
    Net income attributable to                                               
     Company stockholders              $1.39     $0.11     $2.07     $5.88 
                                    ========   ======== ========  ========
                                                                   
    Weighted-average shares
     outstanding used in                    
     computing income per 
     common share:                          
          Basic                       52,688    67,193    47,400    77,738 
                                    ========   ======== ========  ========
          Diluted                     71,945    67,785    57,740    97,824 
                                    ========   ======== ========  ========
                                                                   
      For the prior year periods, weighted-average shares outstanding used in 
    computing income per common share have been adjusted by multiplying the 
    historical weighted-average shares outstanding for HLTH Corporation by 
    the 0.4444 exchange ratio in the Merger. Additionally, basic and diluted 
    income per common share have been recalculated to reflect the adjusted 
    weighted-average shares outstanding for the prior year periods presented.
    For the 2009 periods, these adjustments apply to the portion of each 
    period prior to the completion of the Merger on October 23, 2009 and the 
    actual outstanding shares were used following the completion of the 
    Merger.
     
    
    
                              WEBMD HEALTH CORP.                          
                CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION           
                (In thousands, except per share data, unaudited)          
                                                                          
                                                                          
                                     Three Months Ended     Years Ended    
                                        December 31,        December 31,    
                                        ------------        ------------    
                                       2009      2008      2009      2008 
                                       ----      ----      ----      ---- 
    Revenue                                                               
          Public portal                                                   
           advertising and                                                
           sponsorship             $114,875   $86,893  $347,570  $284,416 
          Private portal services    23,198    23,178    90,966    89,046 
                                   --------  --------  --------  --------
                                   $138,073  $110,071  $438,536  $373,462 
                                   ========  ========  ========  ======== 
                                                                          
    Earnings before                                                       
     interest, taxes, 
     non-cash and other 
     items ("Adjusted                                                        
     EBITDA") (a)                   $46,428   $29,375  $112,274   $74,255 
                                                                          
      Adjusted EBITDA per basic                                           
       common share                   $0.88     $0.44     $2.37     $0.96 
                                   --------  --------  --------  --------
      Adjusted EBITDA per                                                 
       diluted common share           $0.65     $0.43     $1.94     $0.76 
                                   --------  --------  --------  --------
                                                                          
    Interest, taxes,                                                      
     non-cash and other                                                   
     items (b)                                                           
      Interest income                 3,089     5,916     9,149    35,300 
      Interest expense               (5,657)   (6,682)  (23,515)  (26,428)
      Income tax benefit                                                  
       (provision)                   50,413     3,026    45,491   (26,638)
      Depreciation and                                                    
       amortization                  (6,992)   (7,233)  (28,185)  (28,410)
      Non-cash stock-based                                                
       compensation                 (11,629)   (5,776)  (39,412)  (24,632)
      Severance and other                                                 
       transaction expenses         (11,066)     (782)  (11,066)   (6,941)
      Restructuring                       -    (7,416)        -    (7,416)
      Non-cash advertising                -    (3,361)   (1,753)   (5,097)
      Gain on repurchases of                                              
       convertible notes                  -         -    10,120         - 
      Equity in earnings of                                               
       EBS Master LLC                     -         -         -     4,007 
      Gain on sale of EBS                                                 
       Master LLC                         -         -         -   538,024 
      Impairment of auction                                               
       rate securities                    -         -         -   (60,108)
      Other (expense)                                                     
       income, net                     (425)      510    (1,416)      657 
                                   --------  --------  --------  --------
    Consolidated                                                          
     income from                                                          
     continuing operations           64,161     7,577    71,687   466,573 
      Consolidated income from                                            
       discontinued                                                       
       operations, net of tax        34,659     2,041    49,354    94,682 
                                   --------  --------  --------  --------
    Consolidated net income                                               
     inclusive of                                                         
     noncontrolling interest         98,820     9,618   121,041   561,255 
      Income attributable to                                              
       noncontrolling interest         (524)   (1,961)   (3,705)   (1,032)
                                   --------  --------  --------  --------
    Net income                                                            
     attributable to                                                      
     Company stockholders           $98,296    $7,657  $117,336  $560,223 
                                   ========  ========  ========  ========
    Weighted-average shares                                               
     outstanding used in                                                  
     computing Adjusted EBITDA                                           
     per common share:                                                  
      Basic                          52,688    67,193    47,400    77,738 
                                   ========  ========  ========  ========
      Diluted                        71,945    67,785    57,740    97,824 
                                   ========  ========  ========  ========
                                                                          
                                                                          
    (a) See Annex A-Explanation of Non-GAAP Financial Measures. 
    (b) Reconciliation of Adjusted EBITDA to consolidated income from
        continuing operations. 
    
      For the prior year periods, weighted-average shares outstanding used in 
    computing income per common share have been adjusted by multiplying the 
    historical weighted-average shares outstanding for HLTH Corporation by 
    the 0.4444 exchange ratio in the Merger. Additionally, basic and diluted 
    income per common share have been recalculated to reflect the adjusted 
    weighted-average shares outstanding for the prior year periods presented.
    For the 2009 periods, these adjustments apply to the portion of each 
    period prior to the completion of the Merger on October 23, 2009 and the 
    actual outstanding shares were used following the completion of the 
    Merger.
    
    
                                WEBMD HEALTH CORP.                 
                      CONDENSED CONSOLIDATED BALANCE SHEETS        
                            (In thousands, unaudited)             
                                                         
                                                   December 31,    
                                                 ---------------  
                                                 2009         2008
                                                 ----         ----
    Assets                                               
    ------                                               
    Cash and cash equivalents                $459,766     $629,848
    Accounts receivable, net                  118,155       93,082
    Prepaid expenses and other                           
     current assets                            11,419       18,644
    Investments                                 9,932            -
    Deferred tax asset                              -       26,096
    Assets of discontinued operations               -      131,350
                                           ----------   ----------
            Total current assets              599,272      899,020
                                                         
    Investments                               338,446      288,049
    Property and equipment, net                52,194       56,633
    Goodwill                                  202,104      202,104
    Intangible assets, net                     26,020       32,328
    Deferred tax asset                         50,789            -
    Other assets                               19,723       23,600
                                           ----------   ----------
    Total Assets                           $1,288,548   $1,501,734
                                           ==========   ==========
    Liabilities and Equity                               
    ----------------------                               
    Accrued expenses                          $63,721      $54,595
    Deferred revenue                           98,474       79,613
    1.75% convertible notes                   264,583            -
    Deferred tax liability                     12,955            -
    Liabilities of discontinued operations     34,197      100,771
                                           ----------   ----------
          Total current liabilities           473,930      234,979
                                                           
    1.75% convertible notes                         -      350,000
    3 1/8% convertible notes, net of
     discount of $22,641 at 
     December 31, 2009 and                               
     $35,982 at December 31, 2008             227,659      264,018
    Other long-term liabilities                22,191       21,816
                                                         
    Stockholders' equity                      564,768      496,698
    Noncontrolling interest                         -      134,223
                                           ----------   ----------
      Total Equity                            564,768      630,921
                                                         
                                           ----------   ----------
    Total Liabilities and Equity           $1,288,548   $1,501,734
                                           ==========   ==========
    
    
                            WEBMD HEALTH CORP.                        
                   CONSOLIDATED STATEMENTS OF CASH FLOWS              
                         (In thousands, unaudited)                    
                                                                      
                                                       Years Ended    
                                                      December 31,    
                                                      ------------    
                                                       2009      2008 
                                                       ----      ---- 
    Cash flows from operating activities:                             
      Consolidated net income inclusive of                            
       noncontrolling interest                     $121,041  $561,255 
      Adjustments to reconcile consolidated
       net income inclusive of noncontrolling                      
       interest to net cash provided by
       operating activities:        
        Consolidated income from discontinued                         
         operations, net of tax                     (49,354)  (94,682)
        Depreciation and amortization                28,185    28,410 
        Equity in earnings of EBS Master LLC              -    (4,007)
        Non-cash interest expense                    10,205     9,859 
        Non-cash advertising                          1,753     5,097 
        Non-cash stock-based compensation            39,412    24,632 
        Deferred income taxes                       (42,143)    7,474 
        Gain on repurchases of convertible notes    (10,120)        - 
        Gain on sale of EBS Master LLC                    -  (538,024)
        Impairment of auction rate securities             -    60,108 
        Changes in operating assets and liabilities:                  
          Accounts receivable                       (25,073)   (9,672)
          Prepaid expenses and other, net             6,979     1,893 
          Accrued expenses and other long-term                        
           liabilities                               14,495     6,052 
          Deferred revenue                           18,861     4,095 
                                                    -------   -------
            Net cash provided by continuing                           
             operations                             114,241    62,490 
            Net cash provided by  discontinued                        
             operations                                 305    34,624 
                                                    -------   -------
            Net cash provided by operating                            
             activities                             114,546    97,114 
                                                                      
    Cash flows from investing activities:                             
      Proceeds from maturities and sales of                           
       available-for-sale securities                  2,300   118,339 
      Purchases of available-for-sale securities          -  (177,150)
      Purchases of property and equipment           (17,886)  (24,265)
      Purchase of investment in preferred stock           -    (6,471)
      Cash paid in business combinations, net of                      
       cash acquired                                      -    (2,633)
      Purchase of noncontrolling interest in                          
       subsidiary                                         -   (12,818)
      Proceeds from the sale of discontinued                          
       operations                                    72,318   247,491 
      Proceeds related to the sale of EBS Master                      
       LLC                                                -   574,617 
      Other                                               -     1,224 
                                                    -------   -------
            Net cash provided by continuing                           
             operations                              56,732   718,334 
            Net cash used in discontinued                             
             operations                              (3,552)   (4,852)
                                                    -------   -------
            Net cash provided by investing                            
             activities                              53,180   713,482 
                                                                      
    Cash flows from financing activities:                             
      Proceeds from issuance of common stock         49,767    27,883 
      Cash used for withholding taxes due on                          
       employee stock awards                        (24,514)   (6,200)
      Purchase of treasury stock in tender offer   (235,220) (737,324)
      Repurchases of convertible notes             (123,857)        - 
      Cash paid for merger related costs             (5,021)        - 
      Other                                             480        48 
                                                    -------   -------
            Net cash used in continuing                               
             operations                            (338,365) (715,593)
            Net cash used in discontinued                             
             operations                                   -       (76)
                                                    -------   -------
            Net cash used in financing                                
             activities                            (338,365) (715,669)
    Effect of exchange rates on cash                    557    (1,958)
                                                    -------   -------
    Net (decrease) increase in cash and                               
     cash equivalents                              (170,082)   92,969 
    Cash and cash equivalents at                                      
     beginning of period                            629,848   536,879 
                                                    -------   ------- 
    Cash and cash equivalents at end                                  
     of period                                     $459,766  $629,848 
                                                   ========  ======== 
    
    
    
                             WEBMD HEALTH CORP.                        
        CONSOLIDATED NET INCOME ATTRIBUTABLE TO COMPANY STOCKHOLDERS   
              (In thousands, except per share data, unaudited)         
                                                           
                                    Three Months Ended   Years Ended    
                                       December 31,      December 31,   
                                       ------------      ------------   
                                       2009    2008     2009      2008 
                                       ----    ----     ----      ---- 
    Amounts Attributable to                                    
     Company Stockholders:                                     
      Numerator:                                                       
      Income from continuing                                           
       operations - Basic (a)       $62,751  $5,611  $66,231  $465,725 
        Interest expense on                                            
         1.75% convertible                                             
         notes, net of tax              876       -    3,714     4,600 
        Interest expense on                                            
         3 1/8% convertible                                               
         notes, net of tax            2,472       -        -    11,255 
        Effect of dilutive                                             
         securities of subsidiary       (57)   (288)    (343)     (587)
                                   -------- ------- --------  --------
      Income from continuing                                           
       operations - Diluted         $66,042  $5,323  $69,602  $480,993 
                                   ======== ======= ========  ======== 
                                                                       
      Income from discontinued                                         
       operations, net of tax -                                       
       Basic (a)                    $34,176  $2,046  $49,727   $94,498 
        Effect of dilutive                                             
         securities of subsidiary         -       -       53       (27)
                                   -------- ------- --------  --------
      Income from discontinued                                         
       operations, net of tax -                                       
       Diluted                      $34,176  $2,046  $49,780   $94,471 
                                   ======== ======= ========  ========
                                                                       
                                                                       
                                                                       
      Denominator:                                                     
      Weighted-average shares                                          
       - Basic                       52,688  67,193   47,400    77,738 
        Employee stock options,                                        
         restricted stock and                                          
         warrants                     4,470     592    2,265     1,414 
        1.75% Convertible notes       7,640       -    8,075    10,107 
        3 1/8% Convertible notes      7,147       -        -     8,565 
                                   -------- ------- --------  --------
      Adjusted weighted-average                                        
       shares after assumed                                            
        conversions - Diluted        71,945  67,785   57,740    97,824 
                                   ======== ======= ========  ========
                                                                       
      Basic income per common share:                                    
        Income from continuing                                         
         operations                   $1.19   $0.08    $1.40     $5.99 
        Income from discontinued                                       
         operations                    0.65    0.03     1.05      1.22 
                                   -------- ------- --------  --------
      Net income attributable to                                       
       Company stockholders           $1.84   $0.11    $2.45     $7.21 
                                   ======== ======= ========  ========
                                                                       
      Diluted income per common share:                                 
        Income from continuing                                         
         operations                   $0.92   $0.08    $1.21     $4.92 
        Income from discontinued                                       
         operations                    0.47    0.03     0.86      0.96 
                                   -------- ------- --------  -------- 
      Net income attributable to                                       
       Company stockholders           $1.39   $0.11    $2.07     $5.88 
                                   ======== ======= ========  ========
                                                                       
    (a) Adjusted for the effect of non-vested restricted stock if dilutive to
        income per common share. 
    
      For the prior year periods, weighted-average shares outstanding used in 
    computing income per common share have been adjusted by multiplying the 
    historical weighted-average shares outstanding for HLTH Corporation by 
    the 0.4444 exchange ratio in the Merger. Additionally, basic and diluted 
    income per common share have been recalculated to reflect the adjusted 
    weighted-average shares outstanding for the prior year periods presented.
    For the 2009 periods, these adjustments apply to the portion of each 
    period prior to the completion of the Merger on October 23, 2009 and the 
    actual outstanding shares were used following the completion of the 
    Merger. 
    
    
    
    FINANCIAL GUIDANCE SUMMARY                                            
                                                                          
                               WebMD Health Corp                          
                            2010 Financial Guidance                       
                    (in millions, except per share amounts)               
                                                                          
                                                                          
                                           Year Ended        Year Ended   
                                       December 31, 2009  December 31, 2010 
                                            Actuals        Guidance Range 
                                            -------        -------------- 
                                                                          
    Revenue                                   $438.5       $510.0  $525.0 
                                              ======       ======  ====== 
                                                                          
    Earnings before interest, taxes, non-cash
     and other items ("Adjusted EBITDA") (a)  $112.3       $150.0  $158.0 
                                                                          
    Adjusted EBITDA per diluted common share   $1.94        $2.27   $2.39 
                                                                          
    Interest, taxes, non-cash 
     and other items (b)              
      Interest income                            9.2         11.0    12.0 
      Interest expense                         (23.5)       (19.0)  (18.0)
      Depreciation and amortization            (28.2)       (30.0)  (28.0)
      Non-cash stock-based compensation        (39.4)       (33.0)  (31.0)
      Non-cash advertising                      (1.8)           -       - 
      Severance and other transaction 
       expenses                                (11.1)           -       - 
      Gain on repurchases of convertible 
       notes                                    10.1            -       - 
      Other expenses, net                       (1.4)           -       -
                                                ----         ----    ---- 
    Consolidated pre-tax income 
     from continuing operations                 26.2         79.0    93.0 
                                                                          
      Income tax benefit (provision)            45.5        (34.0)  (40.0)
                                                                        
                                                ----         ----    ---- 
    Consolidated income (loss) 
     from continuing operations                 71.7         45.0    53.0 
                                                                          
    Income attributable to noncontrolling 
     interest                                   (4.7)           -       - 
                                                                          
                                               -----        -----   ----- 
    Income from continuing operations          $67.0        $45.0   $53.0 
                                               =====        =====   ===== 
                                                                          
    Income from continuing operations per
     share                                                 
       Basic                                   $1.40        $0.79   $0.93 
                                               =====        =====   ===== 
       Diluted                                 $1.21        $0.68   $0.80 
                                               =====        =====   ===== 
                                                                          
    Weighted-average shares outstanding used in
     computing income from continuing operations                           
     per common share:                                                  
      Basic                                     47.4         57.0    57.0 
      Diluted                                   57.7         66.0    66.0 
                                                                          
                                                                          
    (a) See Annex A - Explanation of Non-GAAP Financial Measures 
    
    (b) Reconciliation of Adjusted EBITDA to consolidated income from
        continuing operations 
    
    Additional information regarding forecast for first quarter of 2010:  
         - Revenue is forecasted to be approximately $103 to $106 in quarter
           ending March 31, 2010  
         - Adjusted EBITDA as a percentage of revenue is forecasted to be 
           approximately 21.5% to 22.5% in quarter ending March 31, 2010  
         - Net Income as a percentage of revenue is forecasted to be 
           approximately 2% to 3.5% in quarter ending March 31, 2010  
    
    Additional information regarding full year 2010 forecast:  
         - Income tax rate for 2010 is forecasted to be approximately 43% of 
           pretax income.   
         - The distribution of the annual revenue is expected to be 
           approximately 83% public portal advertising and sponsorship and  
           17% private portal services.  Quarterly revenue distributions may 
           vary from this annual estimate 
         - 2010 guidance excludes any gains or losses related to repurchase 
           of convertible notes.   
    

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, “consolidated income (loss) from continuing operations” or “net (loss) income attributable to Company stockholders” calculated in accordance with GAAP.  The accompanying financial tables include reconciliations of non-GAAP financial measures to GAAP financial measures.  We also sometimes refer to:   “Adjusted EBITDA margin” which, for any specified period, is calculated as the percent of revenue (calculated in accordance with GAAP) that “Adjusted EBITDA” represents; and “Adjusted EBITDA margin on incremental revenue” which, for any specified period-to-period comparison, is calculated as the percent of the difference in revenue (calculated in accordance with GAAP) between the periods that the difference in “Adjusted EBITDA” between the periods represents.

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 consolidated income (loss) from continuing operations or net (loss) income attributable to Company stockholders.  In addition, we use Adjusted EBITDA in the incentive compensation programs applicable to many 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 consolidated income (loss) from continuing operations or net (loss) income attributable to Company stockholders, 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 consolidated income (loss) from continuing operations or to net (loss) income attributable to Company stockholders that accompany our press releases and disclosure documents containing non-GAAP financial measures, including the reconciliations contained in the accompanying financial tables.

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 consolidated income (loss) from continuing operations or to net (loss) income attributable to Company stockholders, 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 “consolidated income (loss) from continuing operations” or “net (loss) income attributable to Company stockholders” 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 us from Adjusted EBITDA but included in consolidated 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.  We exclude depreciation and amortization expense from Adjusted EBITDA because we believe that (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired tangible and intangible assets.  Accordingly, we believe that this exclusion assists management and investors in making period-to-period comparisons of operating performance.  Investors should note that the use of tangible and intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expense will recur in future periods.

  • Stock-Based Compensation Expense.  Stock-based compensation expense is a non-cash expense arising from the grant of stock-based awards to employees.  We believe that excluding the effect of stock-based compensation from Adjusted EBITDA assists management and investors in making period-to-period comparisons in its 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 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         Years Ended
                                     December 31,           December 31,
                                ------------------     -------------------
                                    2009      2008        2009       2008
                                ------------------------------------------
    Non-cash stock-based
     compensation included in:
      Cost of operations         $(1,802)    $(888)    $(6,723)   $(3,818)
      Sales and marketing        $(2,570)      $11     $(8,069)   $(3,591)
      General and administrative $(7,257)  $(4,899)   $(24,620)  $(17,223)
      Income (loss) from
       discontinued operations      $(39)    $(194)      $(693)   $(1,600)
    
  • 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 in 2000.  The advertising was available only on various Newscorp properties, primarily its television network and cable channels, without any cash cost to us and expired in 2009.  We exclude 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 we may otherwise incur and (iii) to assist management and investors in comparing its operating results over multiple periods.  Investors should note that it is likely that we derived 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 $5,097 for the years ended December 31, 2009 and 2008, respectively, and $3,361 for the three months ended December 31, 2008.  There were no non-cash advertising expenses for the three months ended December 31, 2009.

  • Interest Income and Expense.  Interest income is associated with the level of marketable debt securities and other interest bearing accounts in which we invest, as well as with interest expense arising from 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 of the components of interest expense of our convertible notes:

    
    
                                            
                               Three Months Ended        Years Ended
                                  December 31,           December 31,
                               ------------------    -------------------
                                  2009      2008       2009      2008
                               -----------------------------------------
    Non-cash interest expense
      1.75% Convertible Notes      $(302)    $(390)   $(1,272)  $(1,542)
      3 1/8% Convertible Notes   $(2,166)  $(2,415)   $(8,933)  $(9,386)
    
    Cash interest expense
      1.75% Convertible Notes    $(1,158)  $(1,531)   $(4,918)  $(6,125)
      3 1/8% Convertible Notes   $(1,956)  $(2,344)   $(8,310)  $(9,375)
    
  • Income Tax Provision (Benefit).  We maintain a valuation allowance on a portion of our net deferred tax assets including our net operating loss carryforwards, the amount of which may change from quarter to quarter based on factors that are not directly related to our results for the quarter.  The valuation allowance is either reversed through the statement of operations or additional paid-in capital.  The timing of such reversals has not been consistent and as a result, our income tax expense can fluctuate significantly from period to period in a manner not directly related to our operating performance.  We exclude the income tax provision (benefit) from Adjusted EBITDA (i) because we believe that the income tax provision (benefit) is not directly attributable to the underlying performance of our business operations and, accordingly, its exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different tax attributes.  Investors should note that income tax provision (benefit) will recur in future periods.

  • Other Items.  We engage in other activities and transactions that can impact our overall consolidated income (loss) from continuing operations.  These other items included, but were not limited to, (i) legal expenses relating to the on-going Department of Justice investigation, (ii) equity in earnings of EBS Master LLC, which represented 48% of EBS’s income through February 8, 2008, (iii) gain on repurchases of our convertible notes, (iv) a reduction of certain sales and use tax contingencies resulting from the expiration of certain applicable statutes of limitations, (v) advisory expenses relating to the merger of HLTH Corporation into our company in 2009 and, in the prior year, relating to consideration of strategic alternatives, (vi) gain on sale from the sale of the remaining 48% ownership interest in EBS Master LLC, (vii) loss on the impairment of auction rate securities, and (viii) restructuring charge.  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