WEBMD HEALTH CORP. NEW YORK, May 4, 2016 /PRNewswire/ -- WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the three months ended March 31, 2016.
"WebMD continues to attract larger, higher-quality and more deeply engaged audiences than any of our competitors. Our strong first quarter results reflect our market leadership and position as a key digital partner to leading health advertisers," said David Schlanger, Chief Executive Officer, WebMD. "We are pleased to be making a modest increase to our financial expectations for the full year 2016 as the positive momentum we are experiencing with our advertisers continues."
Financial Highlights
For the three months ended March 31, 2016:
-- Revenue was $158.6 million, compared to $143.3 million in the prior year
period, an increase of 11%. Advertising and sponsorship revenue was
$122.4 million compared to $105.8 million in the prior year period.
Private portal services revenue was $28.3 million compared to $29.3
million in the prior year period. Information services revenue was $7.9
million compared to $8.2 million in the prior year period.
-- Earnings before interest, taxes, non-cash and other items ("Adjusted
EBITDA") increased 21% to $47.1 million, or 30% of revenue, compared to
$38.9 million, or 27% of revenue, in the prior year period.
-- Net income was $15.7 million or $0.36 per diluted share, compared to
$10.0 million, or $0.25 per diluted share in the prior year period.
Traffic Highlights
Traffic to the WebMD Health Network during the first quarter of 2016 reached an average of 210.8 million unique users per month generating 4.40 billion page views for the quarter, increases of 1% and 4%, respectively, from the prior year period.
Balance Sheet Highlights
As of March 31, 2016, WebMD had: approximately $593 million in cash and cash equivalents; $700 million in aggregate principal amount of convertible notes outstanding; and approximately 38.6 million shares of its common stock outstanding (including approximately 0.8 million unvested shares of restricted stock).
As of March 31, 2016, approximately $34 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.
Financial Guidance
Today, WebMD increased its financial guidance for 2016.
For the full year ending December 31, 2016, WebMD expects:
-- Revenue to be approximately $695 million to $708 million, an increase of
9% to 11% from the prior year.
-- $559 million to $570 million of revenue is expected to be from
advertising and sponsorship, an increase of 12% to 14% from the
prior year. Growth in advertising and sponsorship revenue is
expected to be driven by growth in revenue from biopharma customers
of approximately 15% to 17%.
-- $109 million to $110 million of revenue is expected to be from
private portals services, compared to $110.4 million in 2015.
-- $27 million to $28 million of revenue is expected to be from
information services, compared to $26.9 million in 2015.
-- Adjusted EBITDA to be approximately $224 million to $232 million, an
increase of 16% to 20% from the prior year. Adjusted EBITDA, as a
percentage of revenue, is expected to be approximately 32% to 33%,
compared to 30% in the prior year.
-- Net income to be approximately $83 million to $91 million, or $1.81 to
$1.93 per diluted share, compared to $64 million, or $1.48 per diluted
share, in 2015.
For the second quarter of 2016, WebMD expects:
-- Revenue to be approximately $163 million to $166 million, an increase of
10% to 12% from the prior year period.
-- Adjusted EBITDA to be approximately $48 million to $50 million, an
increase of approximately 18% to 23% from the prior year period.
-- Net income to be approximately $16.5 million to $18 million, an increase
of approximately 23% to 35% from the prior year period.
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.
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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.
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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.
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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
March 31,
---------
2016 2015
---- ----
Revenue $158,553 $143,343
Cost of operations 62,513 57,877
Sales and marketing 33,756 32,476
General and administrative 23,756 21,453
Depreciation and amortization 7,487 8,245
Interest income 206 17
Interest expense 5,100 6,172
Income before income tax provision 26,147 17,137
Income tax provision 10,429 7,133
------
Net income $15,718 $10,004
======= =======
Net income per common share:
Basic $0.42 $0.27
=====
Diluted $0.36 $0.25
=====
Weighted-average shares outstanding used in
computing income per common share:
Basic 37,267 36,393
Diluted 52,335 43,465
WEBMD HEALTH CORP.
CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, unaudited)
Three Months Ended
March 31,
---------
2016 2015
---- ----
Revenue
Advertising and sponsorship
Biopharma and medical device $88,685 $75,845
OTC, CPG and other 33,754 29,948
----------------
122,439 105,793
Private portal services 28,255 29,322
Information services 7,859 8,228
----- -----
$158,553 $143,343
======== ========
Earnings before interest, taxes, non-cash
and other items ("Adjusted EBITDA")
(a) $47,056 $38,918
Interest, taxes, non-cash and other items (b)
Interest income 206 17
Interest expense (5,100) (6,172)
Income tax provision (10,429) (7,133)
Depreciation and amortization (7,487) (8,245)
Non-cash stock-based compensation (8,528) (7,381)
Net income $15,718 $10,004
======= =======
(a) See Annex A-Explanation of Non-GAAP Financial Measures.
(b) Reconciliation of Adjusted EBITDA to net income.
WEBMD HEALTH CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2016 2015
---- ----
(unaudited)
Assets
------
Cash and cash equivalents $592,871 $641,165
Accounts receivable, net 177,383 174,313
Prepaid expenses and other current assets 20,505 18,998
Total current assets 790,759 834,476
Property and equipment, net 86,835 81,027
Goodwill 202,980 202,980
Intangible assets, net 10,114 10,894
Deferred tax assets, net 14,591 15,694
Other assets 10,631 10,852
Total Assets $1,115,910 $1,155,923
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Accrued expenses $63,540 $80,664
Deferred revenue 116,313 102,715
2.25% convertible notes due 2016, net - 102,523
Total current liabilities 179,853 285,902
2.50% convertible notes due 2018, net 396,727 396,281
1.50% convertible notes due 2020, net 294,558 294,266
Other long-term liabilities 23,909 23,246
Stockholders' equity 220,863 156,228
Total Liabilities and Stockholders' Equity $1,115,910 $1,155,923
========== ==========
WEBMD HEALTH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Three Months Ended
March 31,
---------
2016 2015
---- ----
Cash flows from operating activities:
Net income $15,718 $10,004
Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 7,487 8,245
Non-cash interest, net 897 1,128
Non-cash stock-based compensation 8,528 7,381
Deferred income taxes 1,177 (1,535)
Changes in operating assets and liabilities:
Accounts receivable (3,070) 6,425
Prepaid expenses and other, net 1,731 (4,587)
Accrued expenses and other long-term
liabilities (20,147) (17,515)
Deferred revenue 13,598 14,831
------ ------
Net cash provided by operating activities 25,919 24,377
Cash flows from investing activities:
Purchases of property and equipment (9,229) (3,670)
Partial redemption of cost-method investment 526 -
Net cash used in investing activities (8,703) (3,670)
Cash flows from financing activities:
Proceeds from exercise of stock options 30,165 4,488
Cash used for withholding taxes due on stock-based
awards (890) (1,044)
Maturity of convertible notes (102,682) -
Purchases of treasury stock - (3,219)
Excess tax benefit on stock-based awards 7,897 7,584
Net cash (used in) provided by financing activities (65,510) 7,809
------- -----
Net (decrease) increase in cash and cash equivalents (48,294) 28,516
Cash and cash equivalents at beginning of period 641,165 706,776
------- -------
Cash and cash equivalents at end of period $592,871 $735,292
======== ========
WEBMD HEALTH CORP.
NET INCOME PER COMMON SHARE
(In thousands, except per share data, unaudited)
Three Months Ended
March 31,
---------
2016 2015
---- ----
Numerator:
Net income - Basic $15,718 $10,004
Interest expense on 1.50% convertible notes, net of tax 878 864
Interest expense on 2.50% convertible notes, net of tax 1,827 -
Interest expense on 2.25% convertible notes, net of tax 457 -
Net income - Diluted $18,880 $10,868
Denominator:
Weighted-average shares - Basic 37,267 36,393
Stock options and restricted stock 1,755 1,378
1.50% convertible notes 5,694 5,694
2.50% convertible notes 6,205 -
2.25% convertible notes 1,414 -
Adjusted weighted-average shares after assumed conversions -
Diluted 52,335 43,465
=============
Net income per common share:
Basic $0.42 $0.27
===== =====
Diluted $0.36 $0.25
===== =====
WEBMD HEALTH CORP.
FINANCIAL GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2016
(In millions, except per share amounts)
Guidance Range
--------------
Revenue
Advertising and sponsorship
Biopharma and medical device $428.0 $436.0
OTC, CPG and other 131.0 134.0
559.0 570.0
Private portal services 109.0 110.0
Information services 27.0 28.0
$695.0 $708.0
====== ======
Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") (a) $224.0 $232.0
Interest, taxes, non-cash and other items (b)
Interest expense, net (17.5) (17.5)
Depreciation and amortization (34.0) (32.0)
Non-cash stock-based compensation (36.0) (33.0)
----- -----
Income before income tax provision 136.5 149.5
Income tax provision (53.5) (58.5)
----- -----
Net income $83.0 $91.0
===== =====
Income per share:
Basic $2.17 $2.36
===== =====
Diluted (c) $1.81 $1.93
===== =====
Calculation of income per share:
Net income (numerator for basic income per share) $83.0 $91.0
Add-back of interest expense, net of tax, related to:
1.50% convertible notes 3.5 3.5
2.50% convertible notes 7.3 7.3
2.25% convertible notes 0.5 0.5
Numerator for diluted income per share $94.3 $102.3
Weighted average shares outstanding (denominator for basic income
per share) 38.3 38.6
Stock options and restricted stock 1.5 2.0
Weighted average shares issuable upon conversion of:
1.50% convertible notes 5.7 5.7
2.50% convertible notes 6.2 6.2
2.25% convertible notes 0.4 0.4
Denominator for diluted income per share 52.1 52.9
(a) See Annex A - Explanation of Non-GAAP Financial Measures
(b) Reconciliation of Adjusted EBITDA to net income
(c) See Supplemental 2016 Guidance for Income Per Share Calculation below
Additional information regarding forecast for the quarter ending June 30, 2016:
- Revenue is forecasted to be between $163 million to $166 million
- Revenue distribution is forecasted to be approximately 60.5% from Biopharma and medical device;
18% from OTC, CPG and other; 17% from private portal services and 4.5% from information services
- Adjusted EBITDA is forecasted to be between $48 million to $50 million
- Net income is forecasted to be between $16.5 million to $18 million
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 Year Ending December 31, 2016, the 1.50% convertible notes, the 2.50% convertible notes and
the 2.25% convertible notes are expected to be dilutive to net income on both the low end and high end of the full year guidance range.
Additionally, the 1.50% convertible notes and the 2.50% convertible notes may be dilutive in certain future quarters, depending on the
amount of net income for such quarter. The following table contains the approximate level of net income for an individual future 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% 2.50% 1.50% 2.50% 2.25%
Convertible Convertible Convertible Convertible Convertible
Notes Notes Notes Notes Notes (a)
----- ----- ----- ----- ---------
Approximate net income at which $6.1 $12.5 $24.6 $50.1 $56.0
convertible notes become dilutive (b)
Interest expense, net of tax to add-back $0.9 $1.8 $3.5 $7.3 $0.5
to net income (numerator)
Additional shares to include in weighted- 5.7 6.2 5.7 6.2 0.4
average diluted share count (denominator)
(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 additional shares for the 2.25% convertible
notes, weighted for the period that they will be outstanding during the year ending December 31, 2016.
(b) These net income amounts assume a weighted-average diluted share count of 39.8 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") and related per share amounts. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for net income or loss calculated in accordance with GAAP (referred to below as "net income"). The attachments to the press release include reconciliations of non-GAAP financial measures to GAAP financial measures.
Adjusted EBITDA is used by our management as an additional measure of our company's performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluating potential acquisitions or divestitures. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our company's financial results that may not be shown solely by period-to-period comparisons of net income. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees in order to evaluate our company's performance. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. In order to compensate for those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in net income, as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliations of Adjusted EBITDA to net income that accompany our press releases and disclosure documents containing non-GAAP financial measures, including the reconciliations contained in the accompanying press release attachments.
We believe that the presentation of Adjusted EBITDA is useful to investors in their analysis of our results for reasons similar to the reasons why our management finds it useful and because it helps facilitate investor understanding of decisions made by management in light of the performance metrics used in making those decisions. In addition, as more fully described below, we believe that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to net income, helps investors make comparisons between our company and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. However, Adjusted EBITDA is intended to provide a supplemental way of comparing our company with other public companies and is not intended as a substitute for comparisons based on net income. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.
The following is an explanation of the items excluded by us from Adjusted EBITDA but included in net income:
-- 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 our company's operating
performance because (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of our
business operations and (ii) such expenses can vary significantly
between periods as a result of the timing of grants of new stock-based
awards, including grants in connection with acquisitions. Additionally,
we believe that excluding stock-based compensation from Adjusted EBITDA
assists management and investors in making meaningful comparisons
between our company's operating performance and the operating
performance of other companies that may use different forms of employee
compensation or different valuation methodologies for their stock-based
compensation. Investors should note that stock-based compensation is a
key incentive offered to employees whose efforts contributed to the
operating results in the periods presented and are expected to
contribute to operating results in future periods. Investors should
also note that such expenses will recur in the future. Stock-based
compensation expenses included in the Consolidated Statement of
Operations are summarized as follows:
Three Months
Ended
March 31,
---------
2016 2015
---- ----
Non-cash stock-
based compensation
included in:
Cost of
operations $1,290 $1,389
Sales and
marketing $1,562 $1,448
General and
administrative $5,676 $4,544
-- Interest Income and Expense. Interest income is associated with the
level of marketable debt securities and other interest bearing accounts
in which we invest, and interest expense is related to our company's
capital structure (including non-cash interest expense relating to our
convertible notes). Interest income and expense varies over time due to
a variety of financing transactions and due to acquisitions and
divestitures that we have entered into or may enter into in the future.
We have, in the past, issued convertible debentures, repurchased shares
in cash tender offers and repurchased shares and convertible debentures
through other repurchase transactions, and completed the divestiture of
certain businesses. We exclude interest income and interest expense
from Adjusted EBITDA (i) because these items are not directly
attributable to the performance of our business operations and,
accordingly, their exclusion assists management and investors in making
period-to-period comparisons of operating performance and (ii) to assist
management and investors in making comparisons to companies with
different capital structures. Investors should note that interest
income and expense will recur in future periods. The following provides
detail regarding the components of interest expense of our convertible
notes:
Three Months
Ended
March 31,
---------
2016 2015
---- ----
Non-cash
interest expense
2.25%
Convertible
Notes $159 $390
2.50%
Convertible
Notes $446 $446
1.50%
Convertible
Notes $292 $292
Cash interest
expense
2.25%
Convertible
Notes $577 $1,419
2.50%
Convertible
Notes $2,500 $2,500
1.50%
Convertible
Notes $1,125 $1,125
-- 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 adjusted through the
statement of operations or additional paid-in capital. The timing of
such adjustments has not been consistent and as a result, our income tax
expense can fluctuate significantly from period to period in a manner
not directly related to our operating performance. We exclude the
income tax provision (benefit) from Adjusted EBITDA (i) because we
believe that the income tax provision (benefit) is not directly
attributable to the underlying performance of our business operations
and, accordingly, its exclusion assists management and investors in
making period-to-period comparisons of operating performance and (ii) to
assist management and investors in making comparisons to companies with
different tax attributes. Investors should note that income tax
provision (benefit) will recur in future periods.
-- Other Items. We engage in other activities and transactions that can
impact our net income. In recent periods, these other items included,
but were not limited to: (i) gain on investments; (ii) settlements of
litigation or claims; (iii) loss on repurchases of our convertible
notes; and (iv) severance expense. We exclude these other items from
Adjusted EBITDA because we believe these activities or transactions are
not directly attributable to the performance of our business operations
and, accordingly, their exclusion assists management and investors in
making period-to-period comparisons of operating performance. Investors
should note that some of these other items may recur in future periods.
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SOURCE WebMD Health Corp.
