WebMD Reports First Quarter Financial Results and Reaffirms 2017 Guidance
"As expected, our first quarter results were below last year's reflecting a more challenging macro environment for many of our biopharma customers and disappointing sales in 2016 in our Health Services business," said Dr.
Financial Highlights
For the three months ended
- Revenue was
$154.1 milllion, compared to$158.6 million in the prior year period, a decrease of 3%. Advertising and sponsorship revenue was$121.5 million , compared to$122.4 million in the prior year period. Health services revenue was$24.5 million , compared to$28.3 million in the prior year period. Information services revenue was$8.0 million , compared to$7.9 million in the prior year period. - Net income was
$12.3 million or$0.30 per diluted share, compared to$15.7 million or$0.36 per diluted share in the prior year period. - Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") was
$41.0 million , or 26.6% of revenue, compared to$47.1 million , or 29.7% of revenue, in the prior year period.
Balance Sheet Highlights
As of
During the first quarter,
Financial Guidance
Today,
For the full year ending
- Revenue to be approximately
$710 million to$730 million , an increase of 1% to 4% from the prior year. $580 million to$598 million of revenue is expected to be from advertising and sponsorship, an increase of 3% to 7% from the prior year. Advertising and sponsorship from biopharma customers is expected to grow 2% to 5%. Advertising and sponsorship from OTC, CPG and other customers is expected to grow 8% to 11%.$99 million to$100 million of revenue is expected to be from health services, compared to$113.9 million in 2016.$31 million to$32 million of revenue is expected to be from information services, compared to$29.8 million in 2016.- Net income to be approximately
$89.0 million to$98.0 million , or$1.97 to$2.10 per diluted share, compared to$91.3 million , or$1.97 per diluted share, in 2016. - Adjusted EBITDA to be approximately
$233 million to$243 million , an increase of 1% to 5% from the prior year. Adjusted EBITDA, as a percentage of revenue, to be approximately 32.8% to 33.3%, compared to 32.7% in the prior year.
For the second quarter of 2017,
- Revenue to be approximately
$170 million to$173 million , an increase of approximately 1% to 3% from the prior year period. - Net income to be approximately
$16.9 million to$18.5 million , a decrease of approximately 5% to an increase of approximately 4% from the prior year period. - Adjusted EBITDA to be approximately
$49 million to$51 million , a decrease of approximately 2% to an increase of approximately 2% from the prior year period.
A schedule summarizing the Company's financial guidance is attached to this press release.
Analyst and Investor Conference Call
About
The WebMD Health Network includes WebMD.com, Medscape.com, MedicineNet.com, eMedicineHealth.com, RxList.com, OnHealth.com, Medscape Education (Medscape.org) and other
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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: explorations of possible transactions and other strategic alternatives; 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: the nature and timing of any possible transaction or other strategic alternative or of any potential benefits from any such transaction or other alternative; 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,
*************************************
This press release, and the accompanying tables, include both financial measures in accordance with accounting principles generally accepted in
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WebMD®, Medscape®, CME Circle®, Medpulse®, eMedicine®, MedicineNet®, theheart.org® and RxList® are among the trademarks of
|
|||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
(In thousands, except per share data, unaudited) |
|||||||
Three Months Ended |
|||||||
|
|||||||
2017 |
2016 |
||||||
Revenue |
$ 154,058 |
$ 158,553 |
|||||
Cost of operations |
63,501 |
62,513 |
|||||
Sales and marketing |
36,008 |
33,756 |
|||||
General and administrative |
22,619 |
23,756 |
|||||
Depreciation and amortization |
7,061 |
7,487 |
|||||
Interest income |
1,953 |
206 |
|||||
Interest expense |
7,066 |
5,100 |
|||||
Other expense |
262 |
- |
|||||
Income before income tax provision |
19,494 |
26,147 |
|||||
Income tax provision |
7,161 |
10,429 |
|||||
Net income |
$ 12,333 |
$ 15,718 |
|||||
Net income per common share: |
|||||||
Basic |
$ 0.33 |
$ 0.42 |
|||||
Diluted |
$ 0.30 |
$ 0.36 |
|||||
Weighted-average shares outstanding used in |
|||||||
computing income per common share: |
|||||||
Basic |
36,866 |
37,267 |
|||||
Diluted |
49,828 |
52,335 |
|
|||||||
CONSOLIDATED SUPPLEMENTAL FINANCIAL INFORMATION |
|||||||
(In thousands, unaudited) |
|||||||
Three Months Ended |
|||||||
|
|||||||
2017 |
2016 |
||||||
Revenue |
|||||||
Advertising and sponsorship |
|||||||
Biopharma and medical device |
$ 89,480 |
$ 88,685 |
|||||
OTC, CPG and other |
31,998 |
33,754 |
|||||
121,478 |
122,439 |
||||||
Health services |
24,539 |
28,255 |
|||||
Information services |
8,041 |
7,859 |
|||||
$ 154,058 |
$ 158,553 |
||||||
Net income |
$ 12,333 |
$ 15,718 |
|||||
Interest, taxes, non-cash and other items (a) |
|||||||
Interest income |
(1,953) |
(206) |
|||||
Interest expense |
7,066 |
5,100 |
|||||
Income tax provision |
7,161 |
10,429 |
|||||
Depreciation and amortization |
7,061 |
7,487 |
|||||
Non-cash stock-based compensation |
9,023 |
8,528 |
|||||
Other expense |
262 |
- |
|||||
Earnings before interest, taxes, non-cash |
|||||||
and other items ("Adjusted EBITDA") (b) |
$ 40,953 |
$ 47,056 |
|||||
(a) Reconciliation of net income to Adjusted EBITDA. |
|||||||
(b) See Annex A-Explanation of Non-GAAP Financial Measures. |
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
(In thousands) |
|||||
|
|
||||
2017 |
2016 |
||||
(unaudited) |
|||||
Assets |
|||||
Cash and cash equivalents |
$ 88,567 |
$ 492,424 |
|||
Accounts receivable, net |
158,228 |
179,454 |
|||
Investments |
945,885 |
498,500 |
|||
Prepaid expenses and other current assets |
21,381 |
15,294 |
|||
Total current assets |
1,214,061 |
1,185,672 |
|||
Property and equipment, net |
81,870 |
83,296 |
|||
|
202,980 |
202,980 |
|||
Intangible assets, net |
7,124 |
7,774 |
|||
Deferred tax assets, net |
212,690 |
14,544 |
|||
Other assets |
7,382 |
6,920 |
|||
Total Assets |
$ 1,726,107 |
$ 1,501,186 |
|||
Liabilities and Stockholders' Equity |
|||||
Accrued expenses |
$ 56,082 |
$ 78,597 |
|||
Deferred revenue |
123,411 |
105,310 |
|||
2.50% convertible notes due 2018, net |
398,512 |
- |
|||
Total current liabilities |
578,005 |
183,907 |
|||
2.50% convertible notes due 2018, net |
- |
398,066 |
|||
1.50% convertible notes due 2020, net |
295,724 |
295,432 |
|||
2.625% convertible notes due 2023, net |
351,531 |
351,190 |
|||
Other long-term liabilities |
28,067 |
28,731 |
|||
Stockholders' equity |
472,780 |
243,860 |
|||
Total Liabilities and Stockholders' Equity |
$ 1,726,107 |
$ 1,501,186 |
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(In thousands, unaudited) |
||||||||
Three Months Ended |
||||||||
|
||||||||
2017 |
2016 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ 12,333 |
$ 15,718 |
||||||
Adjustments to reconcile net income to net cash provided by |
||||||||
operating activities: |
||||||||
Depreciation and amortization |
7,061 |
7,487 |
||||||
Non-cash interest, net |
1,079 |
897 |
||||||
Non-cash stock-based compensation |
9,023 |
8,528 |
||||||
Deferred income taxes |
6,621 |
9,074 |
||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
21,226 |
(3,070) |
||||||
Prepaid expenses and other, net |
(7,850) |
1,731 |
||||||
Accrued expenses and other long-term liabilities |
(22,722) |
(20,147) |
||||||
Deferred revenue |
18,101 |
13,598 |
||||||
Net cash provided by operating activities |
44,872 |
33,816 |
||||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(5,427) |
(9,229) |
||||||
Purchases of investments |
(446,042) |
- |
||||||
Partial redemption of cost-method investment |
- |
526 |
||||||
Net cash used in investing activities |
(451,469) |
(8,703) |
||||||
Cash flows from financing activities: |
||||||||
Proceeds from exercise of stock options |
6,604 |
30,165 |
||||||
Cash used for withholding taxes due on stock-based awards |
(3,864) |
(890) |
||||||
Maturity of convertible notes |
- |
(102,682) |
||||||
Net cash provided by (used in) financing activities |
2,740 |
(73,407) |
||||||
Net decrease in cash and cash equivalents |
(403,857) |
(48,294) |
||||||
Cash and cash equivalents at beginning of period |
492,424 |
641,165 |
||||||
Cash and cash equivalents at end of period |
$ 88,567 |
$ 592,871 |
|
||||||
NET INCOME PER COMMON SHARE |
||||||
(In thousands, except per share data, unaudited) |
||||||
Three Months Ended |
||||||
|
||||||
2017 |
2016 |
|||||
Numerator: |
||||||
Net income – Basic |
$ 12,333 |
$ 15,718 |
||||
Interest expense on 1.50% convertible notes, net of tax |
878 |
878 |
||||
Interest expense on 2.50% convertible notes, net of tax |
1,827 |
1,827 |
||||
Interest expense on 2.25% convertible notes, net of tax |
- |
457 |
||||
Net income – Diluted |
$ 15,038 |
$ 18,880 |
||||
Denominator: |
||||||
Weighted-average shares – Basic |
36,866 |
37,267 |
||||
Stock options and restricted stock |
1,007 |
1,755 |
||||
1.50% convertible notes |
5,721 |
5,694 |
||||
2.50% convertible notes |
6,234 |
6,205 |
||||
2.25% convertible notes |
- |
1,414 |
||||
Adjusted weighted-average shares after assumed conversions – Diluted |
49,828 |
52,335 |
||||
Net income per common share: |
||||||
Basic |
$ 0.33 |
$ 0.42 |
||||
Diluted |
$ 0.30 |
$ 0.36 |
|
|||||||||
FINANCIAL GUIDANCE FOR THE YEAR ENDING |
|||||||||
(In millions, except per share amounts) |
|||||||||
|
|||||||||
Revenue |
|||||||||
Advertising and sponsorship |
|||||||||
Biopharma and medical device |
$ 437.0 |
$ 450.0 |
|||||||
OTC, CPG and other |
143.0 |
148.0 |
|||||||
580.0 |
598.0 |
||||||||
Health services |
99.0 |
100.0 |
|||||||
Information services |
31.0 |
32.0 |
|||||||
$ 710.0 |
$ 730.0 |
||||||||
Net income |
$ 89.0 |
$ 98.0 |
|||||||
Interest, taxes, non-cash and other items (a) |
|||||||||
Interest expense, net |
21.0 |
21.0 |
|||||||
Income tax provision (d) |
53.7 |
59.7 |
|||||||
Depreciation and amortization |
32.0 |
30.0 |
|||||||
Non-cash stock-based compensation |
37.0 |
34.0 |
|||||||
Other expense |
0.3 |
0.3 |
|||||||
Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") (b) |
$ 233.0 |
$ 243.0 |
|||||||
Income per share: |
|||||||||
Basic |
$ 2.41 |
$ 2.61 |
|||||||
Diluted (c) |
$ 1.97 |
$ 2.10 |
|||||||
Calculation of income per share: |
|||||||||
Net income (numerator for basic income per share) |
$ 89.0 |
$ 98.0 |
|||||||
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 |
|||||||
2.625% convertible notes |
6.7 |
6.7 |
|||||||
Numerator for diluted income per share |
$ 106.5 |
$ 115.5 |
|||||||
Weighted average shares outstanding (denominator for basic income per share) |
37.0 |
37.5 |
|||||||
Stock options and restricted stock |
1.0 |
1.5 |
|||||||
Weighted average shares issuable upon conversion of: |
|||||||||
1.50% convertible notes |
5.7 |
5.7 |
|||||||
2.50% convertible notes |
6.2 |
6.2 |
|||||||
2.625% convertible notes |
4.2 |
4.2 |
|||||||
Denominator for diluted income per share |
54.1 |
55.1 |
|||||||
(a) Reconciliation of net income to Adjusted EBITDA. |
|||||||||
(b) See Annex A - Explanation of Non-GAAP Financial Measures. |
|||||||||
(c) See Supplemental 2017 Guidance for Income Per Share Calculation below. |
|||||||||
(d) The income tax provision included in the 2017 financial guidance excludes any adjustments for excess tax benefits, |
|||||||||
except for actual activity for the year-to-date period ended |
|||||||||
based on actual exercise or settlement activity of stock-based awards in future periods, |
|||||||||
Additional information regarding forecast for the quarter ending |
|||||||||
- Revenue is forecasted to be between |
|||||||||
- Revenue distribution is forecasted to be: approximately 62.5% from Advertising and sponsorship - Biopharma and |
|||||||||
- Net income is forecasted to be between |
|||||||||
- Adjusted EBITDA is forecasted to be between |
|||||||||
- In calculating Adjusted EBITDA, the Company excluded the following expense items that are included in the calculation of Net Income: interest expense, net of |
|||||||||
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, gains or losses from discontinued operations, other non-recurring, one-time or unusual items or the impact, if any, of the Board of Directors' review of potential strategic alternatives. |
|||||||||
|
||||||||||||
SUPPLEMENTAL 2017 GUIDANCE FOR INCOME PER SHARE CALCULATION |
||||||||||||
Based on the Company's Financial Guidance for the Year Ending |
||||||||||||
Quarterly Amounts |
Annual Amounts |
|||||||||||
All amounts in millions |
1.50% |
2.50% |
2.625% |
1.50% |
2.50% |
2.625% |
||||||
Approximate net income at which |
$ 5.8 |
$ 11.9 |
$ 17.5 |
$ 23.3 |
$ 47.7 |
$ 69.8 |
||||||
Interest expense, net of tax to add-back to |
$ 0.9 |
$ 1.8 |
$ 1.7 |
$ 3.5 |
$ 7.3 |
$ 6.7 |
||||||
Additional shares to include in weighted- |
5.7 |
6.2 |
4.2 |
5.7 |
6.2 |
4.2 |
||||||
(a) These net income amounts assume a weighted-average diluted share count of 38.0 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 for a given quarter or annual period. |
ANNEX A
Explanation of Non-GAAP Financial Measures
The accompanying
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 net income to Adjusted EBITDA 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 net income to Adjusted EBITDA, 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
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 |
|||||||||||
|
|||||||||||
2017 |
2016 |
||||||||||
Non-cash stock-based compensation included in: |
|||||||||||
Cost of operations |
$ 1,576 |
$ 1,290 |
|||||||||
Sales and marketing |
$ 1,777 |
$ 1,562 |
|||||||||
General and administrative |
$ 5,670 |
$ 5,676 |
|||||||||
- 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 |
||||||||||||
|
||||||||||||
2017 |
2016 |
|||||||||||
Non-cash interest expense |
||||||||||||
2.25% Convertible Notes |
$ |
— |
$ |
159 |
||||||||
2.50% Convertible Notes |
$ |
446 |
$ |
446 |
||||||||
1.50% Convertible Notes |
$ |
292 |
$ |
292 |
||||||||
2.625% Convertible Notes |
$ |
341 |
$ |
— |
||||||||
Cash interest expense |
||||||||||||
2.25% Convertible Notes |
$ |
— |
$ |
577 |
||||||||
2.50% Convertible Notes |
$ |
2,500 |
$ |
2,500 |
||||||||
1.50% Convertible Notes |
$ |
1,125 |
$ |
1,125 |
||||||||
2.625% Convertible Notes |
$ |
2,362 |
$ |
— |
||||||||
- Income Tax Provision (Benefit). We maintain a valuation allowance on a portion of our net deferred tax assets, the amount of which may change from quarter to quarter through adjustments to the income tax provision (benefit). The income tax provision (benefit) is also adjusted each quarter for excess tax benefits and/or deficiencies related to stock-based awards that vest or are settled in such quarter. 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) loss on repurchases of our convertible notes; (iii) severance expense; and (iv) legal fees and other expenses incurred in connection with the process conducted by our Board of Directors to explore strategic alternatives for our 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.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/webmd-reports-first-quarter-financial-results-and-reaffirms-2017-guidance-300449920.html
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