Delaware | 0-51547 | 20-2783228 | ||
(State or other jurisdiction of | (Commission File Number) | (I.R.S. Employer Identification | ||
incorporation) | No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits. The following exhibits are furnished herewith: |
Exhibit | ||
Number | Description | |
99.1
|
Press Release, dated May 5, 2011, regarding the Registrants results for the quarter ended March 31, 2011 | |
99.2
|
Financial Tables accompanying Exhibit 99.1 | |
99.3
|
Financial Guidance Summary accompanying Exhibit 99.1 | |
99.4
|
Annex A to Exhibits 99.1 through 99.3 |
2
WEBMD HEALTH CORP. |
||||
Dated: May 5, 2011 | By: | /s/ Lewis H. Leicher | ||
Lewis H. Leicher | ||||
Senior Vice President | ||||
3
Exhibit | ||
Number | Description | |
99.1
|
Press Release, dated May 5, 2011, regarding the Registrants results for the quarter ended March 31, 2011 | |
99.2
|
Financial Tables accompanying Exhibit 99.1 | |
99.3
|
Financial Guidance Summary accompanying Exhibit 99.1 | |
99.4
|
Annex A to Exhibits 99.1 through 99.3 |
| Revenue increased 22% to $131.6 million, compared to $108.0 million in the prior year period. | ||
| Earnings before interest, taxes, non-cash and other items (Adjusted EBITDA) increased 48% to $37.9 million, compared to $25.7 million in the prior year period. | ||
| Net income was $19.5 million or $0.32 per share compared to a net loss of $(3.8) million or $(0.07) per share in the prior year period. Net income would have increased approximately 110% to $10.7 million for the current period, compared to $5.1 million a year ago, without the effect of the following non-operating items (expressed on an after-tax basis): a gain on investments of $8.8 million in the current period; and, in the prior year period, a loss on investments of $(6.7) million and a loss of $(2.2) million related to the retirement of WebMDs convertible notes. |
| Revenue to be approximately $610 million to $640 million, an increase of 14% to 20% over 2010. These amounts represent expected growth of approximately 16% to 23% in public portal advertising and sponsorship revenue over 2010 while private portal services revenue is expected to be essentially flat compared to 2010. | ||
| Adjusted EBITDA to be approximately $215 million to $230 million, an increase of 24% to 32% over 2010. | ||
| Income from continuing operations and net income to be approximately $79.8 million to $91.8 million, or $1.28 to $1.45 per diluted share, an increase of 53% to 76% over income from continuing operations in 2010. |
| Revenue to be in excess of $140 million, an increase of at least 14% over the prior year period. Advertising revenue is expected to increase at least 19%, while private portal revenue is expected to be 5% less than the prior year period. | ||
| Adjusted EBITDA to be approximately 31% of revenue. | ||
| Income from continuing operations and net income to be in excess of 8% of revenue. |
2
3
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenue |
$ | 131,609 | $ | 108,030 | ||||
Cost of operations |
48,449 | 42,994 | ||||||
Sales and marketing |
32,294 | 28,407 | ||||||
General and administrative |
22,821 | 18,809 | ||||||
Depreciation and amortization |
6,424 | 7,015 | ||||||
Interest income |
16 | 3,409 | ||||||
Interest expense |
3,141 | 5,139 | ||||||
Loss on convertible notes |
| 3,727 | ||||||
Gain (loss) on investments |
14,060 | (28,848 | ) | |||||
Other expense, net |
53 | 298 | ||||||
Income (loss) before income tax provision (benefit) |
32,503 | (23,798 | ) | |||||
Income tax provision (benefit) |
12,958 | (20,008 | ) | |||||
Net income (loss) |
$ | 19,545 | $ | (3,790 | ) | |||
Net income (loss) per common share: |
||||||||
Basic |
$ | 0.33 | $ | (0.07 | ) | |||
Diluted |
$ | 0.32 | $ | (0.07 | ) | |||
Weighted-average shares outstanding used in
computing income (loss) per common share: |
||||||||
Basic |
58,184 | 52,191 | ||||||
Diluted |
67,173 | 52,191 | ||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenue |
||||||||
Public portal advertising and sponsorship |
$ | 110,363 | $ | 86,257 | ||||
Private portal services |
21,246 | 21,773 | ||||||
$ | 131,609 | $ | 108,030 | |||||
Earnings before interest, taxes, non-cash
and other items (Adjusted EBITDA) (a) |
$ | 37,858 | $ | 25,657 | ||||
Interest, taxes, non-cash and other items (b) |
||||||||
Interest income |
16 | 3,409 | ||||||
Interest expense |
(3,141 | ) | (5,139 | ) | ||||
Income tax (provision) benefit |
(12,958 | ) | 20,008 | |||||
Depreciation and amortization |
(6,424 | ) | (7,015 | ) | ||||
Non-cash stock-based compensation |
(9,813 | ) | (7,837 | ) | ||||
Loss on convertible notes |
| (3,727 | ) | |||||
Gain (loss) on investments |
14,060 | (28,848 | ) | |||||
Other expense, net |
(53 | ) | (298 | ) | ||||
Net income (loss) |
$ | 19,545 | $ | (3,790 | ) | |||
(a) | See Annex A-Explanation of Non-GAAP Financial Measures. | |
(b) | Reconciliation of Adjusted EBITDA to net income (loss). |
March 31, 2011 | December 31, 2010 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 1,065,383 | $ | 400,501 | ||||
Accounts receivable, net |
128,760 | 134,448 | ||||||
Prepaid expenses and other current assets |
13,389 | 12,161 | ||||||
Deferred tax assets |
22,459 | 23,467 | ||||||
Total current assets |
1,229,991 | 570,577 | ||||||
Property and equipment, net |
59,220 | 61,516 | ||||||
Goodwill |
202,104 | 202,104 | ||||||
Intangible assets, net |
21,970 | 22,626 | ||||||
Deferred tax assets |
67,335 | 71,125 | ||||||
Other assets |
47,584 | 14,254 | ||||||
Total Assets |
$ | 1,628,204 | $ | 942,202 | ||||
Liabilities
and Stockholders Equity |
||||||||
Accrued expenses |
$ | 46,333 | $ | 53,181 | ||||
Deferred revenue |
96,824 | 97,043 | ||||||
Liabilities of discontinued operations |
17,185 | 17,327 | ||||||
Total current liabilities |
160,342 | 167,551 | ||||||
2.50% convertible notes due 2018 |
400,000 | | ||||||
2.25% convertible notes due 2016 |
400,000 | | ||||||
Other long-term liabilities |
22,056 | 21,756 | ||||||
Stockholders equity |
645,806 | 752,895 | ||||||
Total Liabilities and Stockholders Equity |
$ | 1,628,204 | $ | 942,202 | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | 19,545 | $ | (3,790 | ) | |||
Adjustments
to reconcile net income (loss) to net cash provided by
operating activities: |
||||||||
Depreciation and amortization |
6,424 | 7,015 | ||||||
Non-cash interest, net |
516 | 2,090 | ||||||
Non-cash stock-based compensation |
9,813 | 7,837 | ||||||
Deferred income taxes |
4,798 | (21,463 | ) | |||||
Loss on convertible notes |
| 3,727 | ||||||
(Gain) loss on investments |
(14,060 | ) | 28,848 | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
5,688 | (2,429 | ) | |||||
Prepaid expenses and other, net |
622 | (1,829 | ) | |||||
Accrued expenses and other long-term liabilities |
(7,642 | ) | (14,224 | ) | ||||
Deferred revenue |
(219 | ) | 21,665 | |||||
Net cash provided by continuing operations |
25,485 | 27,447 | ||||||
Net cash used in discontinued operations |
(142 | ) | (8,233 | ) | ||||
Net cash provided by operating activities |
25,343 | 19,214 | ||||||
Cash flows from investing activities: |
||||||||
Proceeds from sales of available-for-sale securities |
| 4,500 | ||||||
Proceeds received from ARS option |
5,240 | | ||||||
Purchases of property and equipment |
(4,849 | ) | (3,114 | ) | ||||
Finalization of sale price of discontinued operations |
| (1,430 | ) | |||||
Net cash provided by (used in) investing activities |
391 | (44 | ) | |||||
Cash flows from financing activities: |
||||||||
Proceeds from exercise of stock options |
10,220 | 28,224 | ||||||
Cash used for withholding taxes due on stock-based awards |
(3,172 | ) | (22,449 | ) | ||||
Net proceeds from issuance of the 2.50% Notes and 2.25% Notes |
774,745 | | ||||||
Repurchases
of
31/8% Notes |
| (22,565 | ) | |||||
Purchases of treasury stock |
(150,000 | ) | (13,345 | ) | ||||
Excess tax benefit on stock-based awards |
7,355 | 1,413 | ||||||
Net cash provided by (used in) financing activities |
639,148 | (28,722 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
664,882 | (9,552 | ) | |||||
Cash and cash equivalents at beginning of period |
400,501 | 459,766 | ||||||
Cash and cash equivalents at end of period |
$ | 1,065,383 | $ | 450,214 | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Numerator: |
||||||||
Net income (loss) |
$ | 19,545 | $ | (3,790 | ) | |||
Effect of participating non-vested restricted stock |
(170 | ) | | |||||
Net income (loss) Basic |
19,375 | (3,790 | ) | |||||
Interest expense on 2.50% Notes, net of tax |
1,503 | | ||||||
Interest expense on 2.25% Notes, net of tax |
315 | | ||||||
Net income (loss) Diluted |
$ | 21,193 | $ | (3,790 | ) | |||
Denominator: |
||||||||
Weighted-average shares Basic |
58,184 | 52,191 | ||||||
Employee stock options and restricted stock |
2,527 | | ||||||
2.50% Notes |
5,377 | | ||||||
2.25% Notes |
1,085 | | ||||||
Adjusted weighted-average shares after assumed conversions Diluted |
67,173 | 52,191 | ||||||
Net income (loss) per common share Basic |
$ | 0.33 | $ | (0.07 | ) | |||
Net income (loss) per common share Diluted |
$ | 0.32 | $ | (0.07 | ) | |||
Year Ended | ||||||||
December 31, 2011 | ||||||||
Guidance Range | ||||||||
Revenue |
$ | 610.0 | $ | 640.0 | ||||
Earnings before interest, taxes, depreciation, amortization
and other non-cash items (Adjusted EBITDA) (a) |
$ | 215.0 | $ | 230.0 | ||||
Interest, taxes, depreciation, amortization and other non-cash items (b) |
||||||||
Interest income |
0.5 | 0.5 | ||||||
Interest expense |
(20.7 | ) | (20.7 | ) | ||||
Depreciation and amortization |
(30.0 | ) | (28.0 | ) | ||||
Non-cash stock-based compensation |
(41.0 | ) | (38.0 | ) | ||||
Gain on investments |
14.1 | 14.1 | ||||||
Other expense, net |
(0.1 | ) | (0.1 | ) | ||||
Pre-tax income from continuing operations |
137.8 | 157.8 | ||||||
Income tax provision |
(58.0 | ) | (66.0 | ) | ||||
Income from continuing operations |
$ | 79.8 | $ | 91.8 | ||||
Income from
continuing operations per share: |
||||||||
Basic |
$ | 1.34 | $ | 1.55 | ||||
Diluted |
$ | 1.28 | $ | 1.45 | ||||
Weighted-average shares outstanding used in computing income
from continuing operations per common share: |
||||||||
Basic |
59 | 59 | ||||||
Diluted |
71 | 71 |
(a) | See Annex A Explanation of Non-GAAP Financial Measures | |
(b) | Reconciliation of Adjusted EBITDA to consolidated income from continuing operations |
- | Revenue is forecasted to be in excess of $140 million in the quarter ending June 30, 2011 | ||
- | Adjusted EBITDA as a percentage of revenue is forecasted to be approximately 31% in the quarter ending June 30, 2011 | ||
- | Income from continuing operations as a percentage of revenue is forecasted to be in excess of 8% in the quarter ending June 30, 2011 | ||
- | Basic and diluted share count is forecasted to be approximately 58 million and 61 million shares, respectively. The 2.50% and 2.25% Convertible Notes are not expected to be dilutive to income from continuing operations per share during the quarter ending June 30, 2011. | ||
- | Basic and diluted income from continuing operations per share is forecasted to be in excess of $0.19 and $0.18, respectively. |
- | Income tax rate for 2011 is forecasted to be approximately 42% of pretax income. | ||
- | The distribution of the annual revenue is expected to be approximately 86% public portals advertising and sponsorship and 14% private portal licensing. Quarterly revenue distributions may vary from this annual estimate. | ||
- | 2011 guidance excludes any gains or losses related to investments, other than actual activity related to the quarter ended March 2011. |
- | Basic income per share: Reflects a reduction to net income of $0.6 million to consider the effect of restricted stock. | ||
- | Diluted income per share: Reflects an increase to income from continuing operations of $6.7 million and $5.2 million related to the interest expense (net of tax) on the 2.50% and 2.25% Convertible Notes, respectively, offset by a reduction to income from continuing operations of $0.6 million to consider the effect of restricted stock. The diluted share count reflects an additional 6 million and 4 million shares, related to the 2.50% and 2.25% Convertible Notes, respectively. |
| 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 | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Non-cash stock-based compensation included in: |
||||||||
Cost of operations |
$ | 2,103 | $ | 1,789 | ||||
Sales and marketing |
$ | 2,391 | $ | 2,193 | ||||
General and administrative |
$ | 5,319 | $ | 3,855 |
| 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 companys 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 | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Non-cash interest expense |
||||||||
1.75% Convertible Notes |
$ | | $ | 305 | ||||
31/8% Convertible Notes |
$ | | $ | 2,072 | ||||
2.50% Convertible Notes |
$ | 397 | $ | | ||||
2.25% Convertible Notes |
$ | 119 | $ | | ||||
Cash interest expense |
||||||||
1.75% Convertible Notes |
$ | | $ | 1,158 | ||||
31/8% Convertible Notes |
$ | | $ | 1,604 | ||||
2.50% Convertible Notes |
$ | 2,194 | $ | | ||||
2.25% Convertible Notes |
$ | 425 | $ | |
2
| 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 consolidated net income (loss). In recent periods, these other items have included, but were not limited to: (i) legal expenses relating to the ongoing Department of Justice investigation; (ii) gain or loss on repurchases and conversions of our convertible notes; (iii) a reduction of certain sales and use tax contingencies resulting from the expiration of certain applicable statutes of limitations; and (iv) gain or loss on investments. 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. |
3