ELMWOOD PARK, N.J., May 6 /PRNewswire-FirstCall/ -- HLTH Corporation (NASDAQ:HLTH) today announced financial results for the three months ended March 31, 2008.
Martin J. Wygod, Chairman and Acting Chief Executive Officer of HLTH Corporation, said: "With over 51 million unique monthly users and over 1 billion quarterly page views, WebMD has again achieved record traffic levels and continues to demonstrate its market leadership. The long-term value of the WebMD franchise continues to increase." Consolidated Financial Highlights Revenue for the first quarter was $81.7 million, an increase of 14% over the prior year. Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") for the first quarter was $10.7 million, an increase of 81% over the prior year. Income from continuing operations for the first quarter was $459.6 million or $2.03 per share and net income was $463.2 million or $2.04 per share, both of which include a gain of $538 million, or approximately $514 million net of tax, from the sale of HLTH's 48% minority interest in Emdeon Business Services and a $60.1 million impairment charge related to a reduction in fair value of the Company's auction rate securities (ARS) investments.
HLTH's financial results present the ViPS and Porex businesses as discontinued operations in the current and prior year periods, reflecting the decision to divest these businesses. WebMD's offline professional medical reference and textbook publication business is presented as a discontinued operation in the prior year period, reflecting the sale of that business on December 31, 2007.
Segment Operating Results WebMD's Online Services segment revenue was $78.4 million for the first quarter compared to $68.4 million in the prior year period, an increase of 15%. Advertising and sponsorship revenue increased 18% to $56.1 million. Private portal licensing revenue increased 9% to $21.9 million. Online Services segment Adjusted EBITDA increased 27% to $16.5 million compared to $13.0 million in the prior year period.
WebMD's Publishing and Other Services segment revenue was $3.3 million for the first quarter compared to $3.5 million in the prior year period, a decrease of 7%. Publishing and Other Services segment Adjusted EBITDA was a loss of ($0.8) million compared to a loss of ($0.4) million in the prior year period.
Sale of Investment in Emdeon Business Services As previously reported, HLTH sold its 48% interest in Emdeon Business Services for $575 million in cash on February 8, 2008. HLTH realized a gain of $514 million, net of tax, on the sale.
Investment in Auction Rate Securities At March 31, 2008, HLTH held auction rate securities with a face amount of $363.0 million. The types of ARS investments that HLTH owns are backed by student loans, 97% of which are guaranteed under the Federal Family Education Loan Program (FFELP), and all had credit ratings of AAA or Aaa when purchased. Since February, all auctions involving these securities have failed. The result of a failed auction is that these ARS continue to pay interest in accordance with their terms until the next successful auction; however liquidity will be limited until there is a successful auction or until such time as other markets for these ARS investments develop. It is uncertain when an auction market will develop. HLTH has determined that the fair value of the ARS as of March 31, 2008 was $302.8 million. Accordingly, HLTH has recorded an impairment charge of $60.1 million related to these securities in its results for the quarter ended March 31, 2008.
At March 31, 2008, in addition to HLTH's $302.8 million in ARS holdings, of which $141 million are attributable to WebMD, HLTH has approximately $1.1 billion in cash and cash equivalents, of which $160 million is attributable to WebMD.
Merger with WebMD As previously announced, HLTH and WebMD entered into a definitive merger agreement on February 20, 2008. The agreement provided that HLTH will be merged into WebMD, with each outstanding share of HLTH common stock to be converted into 0.1979 shares of WebMD common stock and $6.89 in cash, subject to certain adjustments. Completion of the merger is conditioned upon, among other things, approval of the stockholders of both HLTH and WebMD. HLTH and WebMD currently expect to file a preliminary proxy statement/prospectus relating to the merger in the next few weeks and believe that would likely allow them to hold stockholder meetings in September to seek those approvals. However, the ability to schedule these meetings will depend on the timing for closing the sales of HLTH's ViPS and Porex businesses, at least one of which must be completed prior to closing the merger, as well as the timing for completion of SEC review of the proxy statement/prospectus. HLTH is currently in the process of selling the ViPS and Porex businesses, with potential purchasers nearing completion of their due diligence investigations.
Financial Guidance HLTH is not providing financial guidance for 2008 at this time. WebMD provided financial guidance in a separate press release issued today.
Analyst and Investor Conference Call As previously announced, HLTH Corporation and WebMD Health Corp. will host a conference call at 4:45 pm (Eastern) today to discuss their respective first quarter results. Investors can access the call via webcast at http://www.hlth.com/ (in the Investor Relations section). A replay of the call will be available at the same web address.
About HLTH HLTH Corporation (NASDAQ:HLTH) is the majority holder of WebMD Health Corp. (NASDAQ:WBMD). WebMD is the leading provider of health information services for consumers, physicians, healthcare professionals, employers and health plans through its public and private online portals and health-focused publications. HLTH also owns ViPS and Porex. ViPS provides healthcare data management, analytics, decision-support and process automation solutions and related information technology services to governmental, Blue Cross Blue Shield and commercial healthcare payers. ViPS' solutions and services help its clients improve patient outcomes, increase customer satisfaction and reduce costs. Porex is a developer, manufacturer and distributor of proprietary porous plastic products and components used in healthcare, industrial and consumer applications.
This press release does not constitute an offer of any securities for sale. In connection with the proposed merger, HLTH and WebMD expect to file, with the SEC, a proxy statement/prospectus as part of a registration statement regarding the proposed transaction. Investors and security holders are urged to read the proxy statement/prospectus because it will contain important information about HLTH and WebMD and the proposed transaction. Investors and security holders may obtain a free copy of the definitive proxy statement/prospectus and other documents when filed by HLTH and WebMD with the SEC at http://www.sec.gov/ or http://www.hlth.com/ or http://www.wbmd.com/. Investors and security holders are urged to read the proxy statement, prospectus and other relevant material when they become available before making any voting or investment decisions with respect to the merger.
All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: expectations regarding the market for HLTH's and WebMD's investments in auction rate securities (ARS); HLTH's and WebMD's future financial results and other measures of WebMD's future performance; market opportunities and WebMD's ability to capitalize on them; the benefits expected from new products or services and from other potential sources of additional revenue; the merger transaction between HLTH and WebMD (the "Merger Transaction"); and the potential sales transactions with respect to ViPS and Porex (the "Potential Sales Transactions"). These statements speak only as of the date of this press release, are based on HLTH's and WebMD's 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: changes in the markets for ARS; market acceptance of WebMD's products and services; WebMD's 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 other Securities and Exchange Commission filings. In addition, there can be no assurances regarding: whether HLTH and WebMD will be able to complete the Merger Transaction or as to the timing of such transaction; or whether HLTH will be able to complete the Potential Sales Transactions or as to the timing or terms of such transactions. Except as required by applicable law or regulation, we do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances.
This press release, and the accompanying tables, include both financial measures in accordance with accounting principles generally accepted in the United States of America, or GAAP, as well as certain non-GAAP financial measures. The tables attached to this press release include reconciliations of these non-GAAP financial measures to GAAP financial measures. In addition, an "Explanation of Non-GAAP Financial Measures" is attached to this press release as Annex A.
WebMD(R), WebMD Health(R), POREX(R) and ViPS(SM) are trademarks of HLTH Corporation or its subsidiaries.
Emdeon(tm) and Emdeon Business Services(tm) are trademarks of Emdeon Business Services, LLC or its subsidiaries.
-Tables Follow- HLTH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited) Three Months Ended
March 31,
2008 2007 Revenue $81,682 $71,881 Costs and expenses:
Cost of operations 31,570 28,618
Sales and marketing 25,830 22,870
General and administrative 21,144 28,443
Depreciation and amortization 6,888 6,325
Interest income 11,936 9,674
Interest expense 4,607 4,709
Gain on sale of EBS Master LLC 538,024 -
Impairment of auction rate
securities 60,108 -
Transition services income, net 50 2,456
Other (expense) income, net (4,194) 426
Income (loss) from continuing
operations before income
tax provision (benefit) 477,351 (6,528)
Income tax provision (benefit) 25,614 (231)
Minority interest in WHC (loss)
income (3,845) 115
Equity in earnings of EBS Master LLC 4,007 7,099
Income from continuing operations 459,589 687
Income from discontinued operations
(net of tax $2,910 and $1,221 in
2008 and 2007) 3,569 5,015
Net income $463,158 $5,702 Basic income per common share:
Income from continuing operations $2.52 $0.00
Income from discontinued operations 0.02 0.03
Net income $2.54 $0.03 Diluted income per common share:
Income from continuing operations $2.03 $0.00
Income from discontinued operations 0.01 0.03
Net income $2.04 $0.03 Weighted-average shares outstanding
used in computing income per common share:
Basic 182,175 176,011
Diluted 228,159 186,355 HLTH CORPORATION
CONSOLIDATED SEGMENT INFORMATION
(In thousands, except per share data, unaudited) Three Months Ended
March 31,
2008 2007
Revenue
WebMD Online Services:
Advertising and sponsorship $56,065 $47,421
Licensing 21,923 20,115
Content syndication and other 417 884
Total WebMD Online Services 78,405 68,420
WebMD Publishing and Other Services 3,277 3,524
Inter-segment eliminations - (63)
$81,682 $71,881
Earnings (loss) before interest,
taxes, non-cash and other items
("Adjusted EBITDA")
WebMD Online Services $16,531 $12,992
WebMD Publishing and Other Services (754) (358)
Corporate (5,059) (6,726)
$10,718 $5,908 Adjusted EBITDA per diluted common
share (a) $0.05 $0.03 Interest, taxes, non-cash and other
items (b)
Depreciation and amortization $(6,888) $(6,325)
Non-cash stock-based compensation (5,972) (9,182)
Non-cash advertising (1,558) (2,320)
Interest income 11,936 9,674
Interest expense (4,607) (4,709)
Gain on sale of EBS Master LLC 538,024 -
Income tax (provision) benefit (25,614) 231
Minority interest in WHC loss
(income) 3,845 (115)
Equity in earnings of EBS Master LLC 4,007 7,099
Impairment of auction rate securities (60,108) -
Other (expense) income, net (4,194) 426
Income from continuing operations 459,589 687
Income from discontinued
operations, net of tax 3,569 5,015
Net income $463,158 $5,702 Basic income per common share:
Income from continuing operations $2.52 $0.00
Income from discontinued operations 0.02 0.03
Net income $2.54 $0.03 Diluted income per common share:
Income from continuing operations $2.03 $0.00
Income from discontinued operations 0.01 0.03
Net income $2.04 $0.03 Weighted-average shares outstanding
used in computing income per common share:
Basic 182,175 176,011
Diluted 228,159 186,355 (a) Adjusted EBITDA per diluted common share is based on the
weighted-average shares outstanding used in computing diluted
income per common share. (b) Reconciliation of Adjusted EBITDA to net income (see Annex A -
Explanation of Non-GAAP Financial Measures).
HLTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited) Three Months Ended
March 31,
2008 2007
Cash flows from operating activities:
Net income $463,158 $5,702
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Income from discontinued
operations, net of tax (3,569) (5,015)
Depreciation and amortization 6,888 6,325
Minority interest in WHC (loss) income (3,845) 115
Equity in earnings of EBS Master LLC (4,007) (7,099)
Amortization of debt issuance costs 743 721
Non-cash advertising 1,558 2,320
Non-cash stock-based compensation 5,972 9,182
Deferred income taxes 5,389 2
Gain on sale of EBS (538,024) (399)
Impairment of auction rate securities 60,108 -
Changes in operating assets and
liabilities:
Accounts receivable 12,220 2,185
Prepaid expenses and other, net 17,493 421
Accrued expenses and other long-
term liabilities 10,320 (46,158)
Deferred revenue 11,714 7,678
Net cash provided by (used in)
continuing operations 46,118 (24,020)
Net cash (used in) provided by
discontinued operations (3,751) 6,712
Net cash provided by (used in)
operating activities 42,367 (17,308) Cash flows from investing activities:
Proceeds from maturities and sales
of available-for-sale securities 104,518 67,922
Purchases of available-for-sale
securities (177,150) (65,932)
Purchases of property and equipment (2,662) (4,780)
Proceeds related to sales of EBS,
EPS and ACS/ACP, net of fees 598,935 2,898
Decrease in net advances to EBS
Master LLC 1,195 19,691
Net cash provided by continuing
operations 524,836 19,799
Net cash used in discontinued
operations (1,438) (847)
Net cash provided by investing
activities 523,398 18,952 Cash flows from financing activities:
Proceeds from issuance of HLTH and
WHC common stock 1,777 63,404
Purchases of treasury stock under
repurchase program - (11,322)
Net cash provided by continuing
operations 1,777 52,082
Net cash used in discontinued
operations (46) (43)
Net cash provided by financing
activities 1,731 52,039
Effect of exchange rates on cash 1,753 184
Net increase in cash and cash
equivalents 569,249 53,867
Cash and cash equivalents at
beginning of period 536,879 614,691
Cash and cash equivalents at
end of period $1,106,128 $668,558 HLTH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited) March 31, 2008 December 31, 2007
Assets
Cash and cash equivalents $1,106,128 $536,879
Marketable securities 309,256 290,858
Accounts receivable, net 73,861 86,081
Due from EBS Master LLC 28 1,224
Prepaid expenses and other current
assets 27,781 71,090
Assets of discontinued operations 266,591 262,964
Total current assets 1,783,645 1,249,096 Marketable equity securities 2,036 2,383
Property and equipment, net 47,883 49,554
Goodwill 214,623 217,323
Intangible assets, net 33,766 36,314
Investment in EBS Master LLC - 25,261
Other assets 59,922 71,466
Total Assets $2,141,875 $1,651,397 Liabilities and Stockholders' Equity
Accrued expenses $59,002 $49,598
Deferred revenue 88,114 76,401
Liabilities of discontinued
operations 113,397 123,131
Total current liabilities 260,513 249,130 Convertible notes 650,000 650,000
Other long-term liabilities 21,214 21,137 Minority interest in WHC 130,231 131,353 Stockholders' equity 1,079,917 599,777 Total Liabilities and Stockholders'
Equity $2,141,875 $1,651,397 ANNEX A Explanation of Non-GAAP Financial Measures The accompanying HLTH Corporation press release and financial tables include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measures represent earnings before interest, taxes, non- cash and other items (which we refer to as "Adjusted EBITDA") and related per share amounts. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, "income from continuing operations" calculated in accordance with GAAP. The tables attached to the accompanying press release include reconciliations of non-GAAP financial measures to GAAP financial measures.
Adjusted EBITDA is used by HLTH's management as an additional measure of HLTH's overall performance and its reporting segments' 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 HLTH's management identify additional trends in HLTH's and its reporting segments' financial results that may not be shown solely by period-to-period comparisons of income from continuing operations. In addition, HLTH uses Adjusted EBITDA in the incentive compensation programs applicable to many of its employees in order to evaluate HLTH's performance. HLTH 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, 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 containing non-GAAP financial measures, including the reconciliations contained in the tables attached to the accompanying press release.
HLTH believes that the presentation of Adjusted EBITDA is useful to investors in their analysis of HLTH's results for reasons similar to the reasons why HLTH's management finds it useful and because it helps facilitate investor understanding of decisions made by HLTH's management in light of the performance metrics used in making those decisions. In addition, as more fully described below, HLTH believes that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to income from continuing operations, helps investors make comparisons between HLTH 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 HLTH 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 HLTH from Adjusted EBITDA but included in income from continuing operations: -- Depreciation and Amortization. Depreciation and amortization expense
is a non-cash expense relating to capital expenditures and intangible
assets arising from acquisitions that are expensed on a straight-line
basis over the estimated useful life of the related assets. HLTH
excludes depreciation and amortization expense from Adjusted EBITDA
because it believes (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of
HLTH's 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, HLTH believes 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. HLTH believes 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 it believes (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of
HLTH's 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, HLTH believes that excluding stock-based
compensation from Adjusted EBITDA assists management and investors in
making meaningful comparisons between HLTH'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.
-- Non-Cash Advertising Expense. This expense relates to the usage of
non-cash advertising obtained from News Corporation ("Newscorp") in
exchange for equity securities issued by HLTH in 2000. The advertising
is available only on various Newscorp properties, primarily its
television network and cable channels without any cash cost to HLTH. The amount of advertising that can be used in any year is subject to
annual contractual limitation and expires in 2010. HLTH does not incur
any other cash expenses related to airing of television advertising. HLTH excludes this expense from Adjusted EBITDA (i) because it is a
non-cash expense, (ii) because it is incremental to other non-
television cash advertising expense that HLTH otherwise incurs, (iii)
because HLTH has not and believes it will not incur cash expenses
relating to television advertising in the future and (iv) to assist
management and investors in comparing its operating results over
multiple periods. Investors should note that it is likely that HLTH
derives some benefit from such advertising and that such expenses will
recur in the future.
-- Interest Income and Expense. Interest income is associated with the
level of marketable debt securities and other interest bearing accounts
in which HLTH invests, as well as with interest expenses arising from
the capital structure of HLTH. Interest income and expense varies over
time due to a variety of financing transactions and due to acquisitions
and divestitures that HLTH has entered into or may enter into in the
future. HLTH has, in the past several years, issued convertible
debentures and preferred stock, repurchased shares in cash tender
offers and through other repurchase transactions, conducted an initial
public offering of equity in its WebMD subsidiary and completed the
divestiture of certain businesses. HLTH excludes interest income and
interest expense from Adjusted EBITDA (i) because these items are not
directly attributable to the performance of HLTH's 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.
-- Income Tax Provision. HLTH had a net operating loss (NOL) carryforward
of approximately $1.3 billion as of the year ended December 31, 2007. HLTH maintained a full valuation allowance on these NOL carryforwards
until the fourth quarter of 2007, at which time a portion of the
valuation allowance was reversed after consideration of the relevant
factors. The related valuation allowances are either reversed through
the income statement, additional paid-in capital, or reversed to
goodwill, to the extent those tax benefits were acquired through
business combinations. The timing of such reversals has not been
consistent and as a result, HLTH's income tax expense can fluctuate
significantly from period to period in a manner not directly related to
HLTH's operating performance. HLTH excludes the income tax provision
from Adjusted EBITDA (i) because it believes that the income tax
provision is not directly attributable to the underlying performance of
HLTH's 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 will recur in future
periods.
-- Minority Interest in WHC. This represents the minority stockholders'
proportionate share of net income of HLTH's majority-owned WebMD Health
Corp. subsidiary (which we refer to as WHC). The size of this Minority
Interest is related to HLTH's percentage ownership of WHC. Changes in
that percentage ownership may result from changes in WHC's capital
structure, including as a result of sales of WHC equity securities by
WHC or HLTH or as a result of exercise of WHC employee stock options. HLTH excludes Minority Interest from Adjusted EBITDA (i) because it
believes that the size of the Minority Interest can vary for reasons
not attributable to the underlying performance of HLTH's 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 capital structures. Investors
should note that Minority Interest in WHC will recur in future periods.
-- Other Items. HLTH engages in other activities and transactions that
can impact HLTH's overall income from continuing operations. These
other items included, but were not limited to, (i) legal expenses
relating to the on-going Department of Justice investigation, (ii)
equity in earnings of EBS Master LLC, which represents 48% of EBS's
income through February 8, 2008, (iii) working capital adjustment from
the sale of 52% of the Emdeon Business Services segment on November 16,
2006, (iv) a reduction of certain sales and use tax contingencies
resulting from the expiration of certain applicable statutes of
limitations, (v) advisory expenses relating to the evaluation, in 2008
and 2007, by HLTH's Board of Directors of strategic alternatives for
HLTH, (vi) gain on sale from the sale of the remaining 48% ownership
interest in EBS Master LLC and (vii) loss on the impairment of auction
rate securities. HLTH excludes these other items from Adjusted EBITDA
because it believes these activities or transactions are not directly
attributable to the performance of HLTH's business operations and,
accordingly, their exclusion assists management and investors in making
period-to-period comparisons of operating performance. Investors
should note that these other items may recur in future periods. DATASOURCE: HLTH Corporation CONTACT: Investors, Risa Fisher, +1-201-414-2002, , or Media, Jennifer Newman, +1-212-624-3912, Web site: http://www.hlth.com/
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