8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

February 23, 2012

Date of Report (Date of earliest event reported)

WEBMD HEALTH CORP.

(Exact name of registrant as specified in its charter)

Delaware	001-35337	20-2783228
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

111 Eighth Avenue

New York, New York 10011

(Address of principal executive offices, including zip code)

(212) 624-3700

(Registrant’s telephone number, including area code)

(Former name or address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On February 23, 2012, WebMD Health Corp. issued a press release announcing its results for the quarter and year ended December 31, 2011. A copy of the press release is attached as Exhibit 99.1 to this Current Report. Exhibit 99.2 to this Current Report contains the financial tables that accompanied the press release. Exhibit 99.3 to this Current Report includes forward-looking financial information that accompanied the press release. Exhibit 99.4 to this Current Report contains an Annex to the press release entitled “Explanation of Non-GAAP Financial Measures.”

Exhibits 99.1 through 99.4 are being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall any of those exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.         Financial Statements and Exhibits.

(d) Exhibits. The following exhibits are furnished herewith:

Exhibit Number	Description
99.1	Press Release, dated February 23, 2012, regarding the Registrant’s results for the quarter and year ended December 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

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WEBMD HEALTH CORP.
Dated: February 23, 2012	By:	/s/ Lewis H. Leicher
		Lewis H. Leicher
		Senior Vice President

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release, dated February 23, 2012, regarding the Registrant’s results for the quarter and year ended December 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

EX-99.1

Exhibit 99.1

Contact:
Investors:	Media:
Risa Fisher	Kate Hahn
rfisher@webmd.net	khahn@webmd.net
212-624-3817	212-624-3760

WebMD Announces Fourth Quarter and Year End Financial Results

New York, NY (February 23, 2012)—WebMD Health Corp. (NASDAQ: WBMD), the leading source of health information, today announced financial results for the twelve and three months ended December 31, 2011.

For the twelve months ended December 31, 2011:

• Revenue was $558.8 million, compared to $534.5 million in the prior year period, an increase of 4.5%. Public portal advertising and sponsorship revenue increased 6.8% to $477.3 million. Private portal services revenue decreased 7% to $81.5 million.

• Adjusted EBITDA was $181.2 million, compared to $173.6 million in the prior year period, an increase of 4.4%.

• Net income was $74.6 million or $1.25 per diluted share compared to $54.1 million or $0.88 per diluted share in the prior year period. Net income would have been $53.8 million or $0.90 per diluted share in the current period as compared to $61.2 million or $1.00 per diluted share in the prior year period, without the effect, in the current period, of an after-tax gain on investments of $11.7 million, after-tax transaction costs of $1.3 million and after-tax income from discontinued operations of $10.4 million and, in the prior year period, of an after-tax loss on convertible notes of $14.1 million, an after-tax gain on investments of $5.2 million and after-tax income from discontinued operations of $1.8 million.

For the three months ended December 31, 2011:

• Revenue was $150.7 million, compared to $168.5 million in the prior year period, a decrease of 10.6%. Public portal advertising and sponsorship revenue decreased 11% to $130.8 million. Private portal services revenue decreased 7.5% to $19.8 million.

• Earnings before interest, taxes, non-cash and other items (“Adjusted EBITDA”) was $54.6 million, compared to $69.1 million in the prior year period, a decrease of 20.9%.

• Net income was $19.2 million or $0.33 per diluted share compared to $36.6 million or $0.59 per diluted share in the prior year period. Net income would have been $18.0

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million or $0.31 per diluted share in the current period as compared to $29.3 million or $0.48 per diluted share in the prior year period, without the effect, in the current period, of an after-tax gain on investments of $2.5 million and after-tax transaction costs of $1.3 million and, in the prior year period, of an after-tax loss on convertible notes of $3.8 million, an after-tax gain on investments of $8.3 million and after-tax income from discontinued operations of $2.8 million.

“Since being named Interim CEO six weeks ago, we have committed ourselves to prioritizing the initiatives that will best position the Company to take advantage of future growth opportunities,” said Anthony Vuolo, Interim Chief Executive Officer and Chief Financial Officer, WebMD. “The management team is working hard to ensure that alignment around our key initiatives is created across the entire organization.”

Traffic Highlights

Traffic to the WebMD Health Network continued to grow, reaching an average of 111.8 million unique users per month and total traffic of 2.32 billion page views during the fourth quarter, increases of 29% each, from a year ago. Traffic growth was primarily driven by increased traffic to WebMD owned and operated sites, which averaged 91.9 million unique users per month, and page views of 2.14 billion, increases of 33% and 30%, respectively, from a year ago. As previously disclosed, beginning on January 1, 2012, substantially all non-owned affiliate sites have been eliminated from the WebMD Health Network.

Balance Sheet Highlights

During the fourth quarter, WebMD repurchased approximately 0.8 million shares of its common stock for a total of $23.8 million.

As of December 31, 2011, WebMD had $1.1 billion in cash and cash equivalents and $800 million in aggregate principal amount of convertible notes outstanding.

Financial Guidance

Today WebMD issued updated financial guidance for 2012. For 2012, WebMD expects:

• Revenue to be approximately $500 million to $535 million, compared to $558.8 million last year. This is a decline of approximately 4% to 11% compared to 2011 and represents a larger decline than what was assumed in the Company’s preliminary outlook for 2012. The revision is primarily a result of the Company’s current visibility for pharmaceutical consumer advertising revenues that indicates a lower revenue trend than previously anticipated.

• Adjusted EBITDA to be approximately $100 million to $125 million, compared to $181.2 million last year. This represents a decline of approximately 31% to 45% compared to last year, primarily resulting from the lower revenue expectations.

• Income (loss) from continuing operations to be approximately $(2.0) million to $15.0 million, or $(0.04) to $0.26 per diluted share, compared to $53.8 million, or $0.90 per diluted share (excluding the after-tax gain on investments of $11.7 million and after-tax transaction costs of $1.3 million) in 2011.

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For the first quarter of 2012, WebMD expects:

• Revenue to be in excess of $105 million, compared to $131.6 million in the prior year period.

• Adjusted EBITDA to be approximately 10% to 11% of revenue, compared to 28.8% in the prior year period.

• Loss from continuing operations to be approximately 9% to 13% of revenue, compared to income from continuing operations of 8.4% (which excludes an after tax gain on investments) in the prior year period.

The income (loss) from continuing operations in the first quarter and full year 2012 includes pre-tax stock compensation expense of approximately $8.0 million related to the surrender of approximately 1 million out-of-the-money stock options by WebMD’s directors and executive officers. These options are being surrendered and added to the 1.1 million shares currently available under WebMD’s existing stock option plan and will be available to attract, retain and motivate employees. Although these options are being voluntarily surrendered for no consideration, the accounting rules require that any unrecognized stock compensation amounts be immediately expensed as a result of the surrender.

WebMD is providing a schedule (attached to this press release) with additional detail.

“Clearly our near-term outlook is disappointing. However, we believe that our opportunities are significant and we will continue to invest to best position ourselves to restore and support long-term growth,” said Martin J. Wygod, Chairman, WebMD.

Analyst and Investor Conference Call

WebMD will hold a conference call with investors and analysts to discuss its fourth quarter and year end 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, mobile platforms and health-focused publications.

The WebMD Health Network includes WebMD Health, Medscape, MedicineNet, emedicineHealth, RxList, theheart.org and Medscape Education.

*****************************

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; and the benefits expected 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

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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; 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.

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WebMD^®, Medscape^®, eMedicine^®, MedicineNet^®, RxList^®, Subimo^®, Medsite^®, Summex^® and Medscape^® Mobile are trademarks of WebMD Health Corp. or its subsidiaries.

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EX-99.2

Exhibit 99.2

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

	Three Months Ended December 31,					Years Ended December 31,
	2011		2010			2011		2010
Revenue	$	150,659	$	168,477		$	558,775	$	534,519
Cost of operations		52,979		51,859			201,677		187,831
Sales and marketing		30,165		34,085			124,326		120,874
General and administrative		23,657		23,146			91,271		85,496
Depreciation and amortization		6,872		7,310			26,801		27,578
Interest income		24		99			112		3,949
Interest expense		5,809		1,347			20,645		11,453
Loss on convertible notes		—		6,362			—		23,332
Gain (loss) on investments		3,837		13,460			18,516		(9,517	)
Transaction and other expense (income)		2,275		(20	)		2,328		72
Income from continuing operations before income tax provision		32,763		57,947			110,355		72,315
Income tax provision		13,561		24,183			46,167		20,043
Income from continuing operations		19,202		33,764			64,188		52,272
Income from discontinued operations, net of tax		—		2,824			10,388		1,800
Net income	$	19,202	$	36,588		$	74,576	$	54,072
Basic income per common share:
Income from continuing operations	$	0.34	$	0.58		$	1.11	$	0.93
Income from discontinued operations		—		0.05			0.18		0.04
Net income	$	0.34	$	0.63		$	1.29	$	0.97
Diluted income per common share:
Income from continuing operations	$	0.33	$	0.55		$	1.08	$	0.85
Income from discontinued operations		—		0.04			0.17		0.03
Net income	$	0.33	$	0.59		$	1.25	$	0.88
Weighted-average shares outstanding used in computing income per common share:
Basic		55,685		57,505			57,356		55,328
Diluted		68,326		62,330			59,124		62,228

WEBMD HEALTH CORP.

CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands, unaudited)

	Three Months Ended December 31,						Years Ended December 31,
	2011			2010			2011			2010
Revenue
Public portal advertising and sponsorship	$	130,821		$	147,042		$	477,325		$	446,969
Private portal services		19,838			21,435			81,450			87,550
	$	150,659		$	168,477		$	558,775		$	534,519
Earnings before interest, taxes, non-cash and other items (“Adjusted EBITDA”) (a)	$	54,626		$	69,082		$	181,238		$	173,618
Interest, taxes, non-cash and other items (b)
Interest income		24			99			112			3,949
Interest expense		(5,809	)		(1,347	)		(20,645	)		(11,453	)
Income tax provision		(13,561	)		(24,183	)		(46,167	)		(20,043	)
Depreciation and amortization		(6,872	)		(7,310	)		(26,801	)		(27,578	)
Non-cash stock-based compensation		(10,768	)		(9,695	)		(39,737	)		(33,300	)
Loss on convertible notes		—			(6,362	)		—			(23,332	)
Gain (loss) on investments		3,837			13,460			18,516			(9,517	)
Transaction and other (expense) income		(2,275	)		20			(2,328	)		(72	)
Income from continuing operations		19,202			33,764			64,188			52,272
Income from discontinued operations, net of tax		—			2,824			10,388			1,800
Net income	$	19,202		$	36,588		$	74,576		$	54,072

(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, unaudited)

	December 31,
	2011		2010
Assets
Cash and cash equivalents	$	1,121,217	$	400,501
Accounts receivable, net		121,335		134,448
Prepaid expenses and other current assets		12,690		12,161
Deferred tax assets		20,482		23,467
Total current assets		1,275,724		570,577
Property and equipment, net		57,139		61,516
Goodwill		202,104		202,104
Intangible assets, net		19,999		22,626
Deferred tax assets		55,017		71,125
Other assets		31,042		14,254
Total Assets	$	1,641,025	$	942,202
Liabilities and Stockholders’ Equity
Accrued expenses	$	55,238	$	53,181
Deferred revenue		88,055		97,043
Liabilities of discontinued operations		1,506		17,327
Total current liabilities		144,799		167,551
2.25% convertible notes due 2016		400,000		—
2.50% convertible notes due 2018		400,000		—
Other long-term liabilities		21,790		21,756
Stockholders’ equity		674,436		752,895
Total Liabilities and Stockholders’ Equity	$	1,641,025	$	942,202

WEBMD HEALTH CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

	Years Ended December 31,
	2011			2010
Cash flows from operating activities:
Net income	$	74,576		$	54,072
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Income from discontinued operations, net of tax		(10,388	)		(1,800	)
Depreciation and amortization		26,801			27,578
Non-cash interest, net		3,758			5,594
Non-cash stock-based compensation		39,737			33,300
Deferred income taxes		13,696			(403	)
Loss on convertible notes		—			23,332
(Gain) loss on investments		(18,516	)		9,517
Changes in operating assets and liabilities:
Accounts receivable		13,113			(16,292	)
Prepaid expenses and other, net		1,416			4,617
Accrued expenses and other long-term liabilities		2,511			213
Deferred revenue		(8,988	)		(1,431	)
Net cash provided by continuing operations		137,716			138,297
Net cash used in discontinued operations		(440	)		(16,474	)
Net cash provided by operating activities		137,276			121,823
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities		—			361,852
Proceeds received from ARS option		21,566			10,467
Purchases of property and equipment		(20,911	)		(32,254	)
Finalization of sale price of discontinued operations		—			(1,430	)
Net cash provided by investing activities		655			338,635
Cash flows from financing activities:
Proceeds from exercise of stock options		28,339			59,825
Cash used for withholding taxes due on stock-based awards		(9,234	)		(86,533	)
Net proceeds from issuance of the 2.50% Notes and 2.25% Notes		774,745			—
Repurchases of 1.75% Notes and 3 1/8% Notes		—			(94,525	)
Purchases of treasury stock		(241,263	)		(420,948	)
Excess tax benefit on stock-based awards		30,198			22,458
Net cash provided by (used in) financing activities		582,785			(519,723	)
Net increase (decrease) in cash and cash equivalents		720,716			(59,265	)
Cash and cash equivalents at beginning of period		400,501			459,766
Cash and cash equivalents at end of period	$	1,121,217		$	400,501

WEBMD HEALTH CORP.

NET INCOME PER COMMON SHARE

(In thousands, except per share data, unaudited)

	Three Months Ended December 31,						Years Ended December 31,
	2011			2010			2011			2010
Numerator:
Income from continuing operations	$	19,202		$	33,764		$	64,188		$	52,272
Effect of participating non-vested restricted stock		(111	)		(339	)		(436	)		(601	)
Income from continuing operations-Basic		19,091			33,425			63,752			51,671
Interest expense on 2.50% Notes, net of tax		1,682			—			—			—
Interest expense on 2.25% Notes, net of tax		1,627			—			—			—
Interest expense on 1.75% Notes, net of tax		—			—			—			1,469
Interest expense on 3 1/8% Notes, net of tax		—			809			—			—
Income from continuing operations — Diluted	$	22,400		$	34,234		$	63,752		$	53,140
Income from discontinued operations, net of tax	$	—		$	2,824		$	10,388		$	1,800
Effect of participating non-vested restricted stock		—			(28	)		(71	)		(21	)
Income from discontinued operations, net of tax — Basic and Diluted	$	—		$	2,796		$	10,317		$	1,779
Denominator:
Weighted-average shares-Basic		55,685			57,505			57,356			55,328
Employee stock options and restricted stock		1,164			2,651			1,768			3,706
2.50% Notes		6,049			—			—			—
2.25% Notes		5,428			—			—			—
1.75% Notes		—			—			—			3,194
3 1/8% Notes		—			2,174			—			—
Adjusted weighted-average shares after assumed conversions — Diluted		68,326			62,330			59,124			62,228
Basic income per common share:
Income from continuing operations	$	0.34		$	0.58		$	1.11		$	0.93
Income from discontinued operations		—			0.05			0.18			0.04
Net income	$	0.34		$	0.63		$	1.29		$	0.97
Diluted income per common share:
Income from continuing operations	$	0.33		$	0.55		$	1.08		$	0.85
Income from discontinued operations		—			0.04			0.17			0.03
Net income	$	0.33		$	0.59		$	1.25		$	0.88

EX-99.3

Exhibit 99.3

WebMD Health Corp.

Financial Guidance for the Year Ending December 31, 2012

(in millions, except per share amounts)

	Year Ending December 31, 2012 Guidance Range
Revenue	$	500.0		$	535.0
Earnings before interest, taxes, depreciation, amortization and other non-cash items (“Adjusted EBITDA”) (a)	$	100.0		$	125.0
Interest, taxes, depreciation, amortization and other non-cash items (b)
Interest expense, net		(23.0	)		(23.0	)
Depreciation and amortization		(28.0	)		(27.0	)
Non-cash stock-based compensation		(48.0	)		(46.0	)
Severance & other expense		(1.0	)		(1.0	)
Pre-tax income from continuing operations		—			28.0
Income tax provision		(2.0	)		(13.0	)
(Loss) income from continuing operations	$	(2.0	)	$	15.0
(Loss) income from continuing operations per share:
Basic	$	(0.04	)	$	0.26
Diluted	$	(0.04	)	$	0.26
Weighted-average shares outstanding used in computing per share amounts:
Basic		57.0			57.0
Diluted		57.0			58.0

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

(b) Reconciliation of Adjusted EBITDA to income from continuing operations

Additional information regarding forecast for the quarter ending March 31, 2012:

• Revenue is forecasted to be in excess of $105 million.

• Adjusted EBITDA as a percentage of revenue is forecasted to be approximately 10% to 11%.

• Loss from continuing operations as a percentage of revenue is forecasted to be approximately 9% to 13%.

• Loss from continuing operations includes pre-tax stock-based compensation expense of approximately $8 million related to the surrender of certain stock options by WebMD’s directors and executive officers.

Additional information regarding full year forecast:

• The distribution of the annual revenue is expected to be approximately 84% public portals advertising and sponsorship and 16% private portal licensing. Quarterly revenue distributions may vary from this annual estimate.

• 2012 guidance excludes any gains or losses related to investments or convertible notes.

• Convertible notes are not expected to be dilutive for the full year or any quarter.

EX-99.4

Exhibit 99.4

ANNEX A

Explanation of Non-GAAP Financial Measures

The accompanying WebMD Health Corp. press release and the attached financial information and guidance include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measures represent earnings before interest, taxes, non-cash and other items (which we refer to as “Adjusted EBITDA”) and related per share amounts. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, “income from continuing operations” or “net income” calculated in accordance with GAAP. The financial information and guidance accompanying 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 income from continuing operations or net income. In addition, we 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 income from continuing operations or 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 income from continuing operations or 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 income from continuing operations or 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 income from continuing operations or net income 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 income from continuing operations and 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 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 December 31,				Twelve Months Ended December 31,
	2011		2010		2011		2010
Non-cash stock-based compensation included in:
Cost of operations	$	2,030	$	2,058	$	7,707	$	7,211
Sales and marketing	$	2,214	$	2,284	$	9,079	$	8,033
General and administrative	$	6,524	$	5,353	$	22,951	$	18,056

• 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 regarding the components of interest expense of our convertible notes:

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2011		2010		2011		2010
Non-cash interest expense
1.75% Convertible Notes	$	—	$	—	$	—	$	885
3 1/8% Convertible Notes	$	—	$	732	$	—	$	4,996
2.50% Convertible Notes	$	452	$	—	$	1,757	$	—
2.25% Convertible Notes	$	604	$	—	$	2,001	$	—
Cash interest expense
1.75% Convertible Notes	$	—	$	—	$	—	$	1,564
3 1/8% Convertible Notes	$	—	$	615	$	—	$	4,007
2.50% Convertible Notes	$	2,500	$	—	$	9,722	$	—
2.25% Convertible Notes	$	2,250	$	—	$	7,150	$	—

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• 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 income from continuing operations and net income. In recent periods, these other items have included, but were not limited to, (i) legal expenses relating to the 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, (iv) gain or loss on investments, and (v) legal fees and other expenses incurred in connection with the process to review a potential sale of the company. 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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