WebMD Announces Third Quarter 2000 Financial ResultsPaul A. Brooke and Herman Sarkowsky Elected to Board of Directors
PR NEWSWIRE - November 13, 2000 16:21
ATLANTA, Nov 13, 2000 /PRNewswire via COMTEX/ -- WebMD Corporation (Nasdaq: HLTH) today announced financial results for the three and nine months ended September 30, 2000.
Financial Highlights
Revenue for the September 2000 quarter was $151.2 million compared to revenue of $101.1 million for the June 2000 quarter, an increase of 50% and compared to revenue of $28.7 million reported in the third quarter of 1999. The net loss, excluding the previously announced restructuring charge of $44.9 million and non-cash charges, for the September 2000 quarter was ($65.8) million or ($0.27) per share, compared to ($55.5) million, or ($0.28) per share for the June 2000 quarter and ($10.1) million or ($0.14) per share for the September 1999 quarter. The net loss for the September 2000 quarter was $(786.9) million or $(3.17) per share compared with $(518.3) million or $(2.64) per share for the June 2000 quarter and $(17.1) million or $(0.24) per share for the September 1999 quarter.
Revenue for the nine months ending September 30, 2000 was $318.2 million compared to revenue of $68.9 million for the corresponding period of 1999. The net loss excluding restructuring charges and non-cash charges, for the nine months ending September 30, 2000 was ($194.3) million, or ($0.94) per share compared to ($32.0) million, or ($0.47) per share for the comparable nine month period in 1999. The net loss for the nine months ended September 30, 2000 was $(1.737) billion or $(8.41) per share compared to $(53.2) million and $(0.79) per share for the nine months ended September 30, 1999.
The Company recorded a restructuring charge during the quarter ended September 30, 2000 in the amount of $44.9 million related to the first phase of its integration plan, which substantially eliminates redundancies that were created in the combination of WebMD with recently acquired companies, ENVOY Corporation, Medical Manager Corporation, CareInsite, Inc. and OnHealth, Inc. The plan is expected to result in annualized savings of approximately $260 million from the elimination of 1,100 jobs and the consolidation of duplicative offices and data centers when completed by the fourth quarter of 2001. The Company also recorded a non-cash charge of $39.6 million during the September quarter primarily relating to various past investments made in internet-related businesses. The non-cash charge reflects the decline in value of such investments, given both the financial condition of the individual companies and the current market conditions for such companies.
The financial results for the quarter and nine months ended September 30, 2000 reflect the acquisition of Kinetra and the transaction with News Corporation completed in late January 2000, the acquisition of Quintiles' electronic data interchange unit, ENVOY Corporation, which was effective May 26, 2000 and the mergers with Medical Manager, CareInsite and OnHealth which were completed on September 12, 2000. These transactions have been accounted for as purchases and are included in the financial results since the acquisition dates. The results for the quarter exclude the Company's plastic and filtration technologies subsidiaries, given the Company's decision to divest these businesses.
As of September 30, 2000, the Company had approximately $817,800,000 in cash and marketable securities.
Commentary Related to the Third Quarter of 2000
In reviewing the quarter, Martin J. Wygod, Chief Executive Officer, said, "This quarter's results are complicated by the September closing of the WebMD, Medical Manager, CareInsite and OnHealth merger transactions and do not demonstrate the benefits of the comprehensive restructuring program underway nor the impact of the new management's strategic initiatives to ensure the Company's leadership role in bringing the benefits of improved healthcare connectivity to our country. We believe that a conservative financial approach coupled with an aggressive strategy to leverage our core assets -- the largest processor of electronic transactions, a leading provider of physician practice management solutions, and the most utilized healthcare Internet portal -- will yield a profitable, high growth company that is well positioned to drive down healthcare costs and improve the quality and efficiency of our healthcare system."
Revenue categories are as follows:
Q3 2000 Q2 2000 Q3 1999
Transaction services $83.6 $ 51.8 $12.1
Physician services 29.0 9.2 --
Portal services 25.6 23.8 --
Other products and services 13.0 16.3 16.6
Total Revenue $151.2 $101.1 $28.7
Transaction Services revenue was $83.6 million, accounting for 55% of total revenue in the third quarter of 2000 compared to 51% in the second quarter of 2000. The transaction revenue mix shift is largely due to the additional revenue contribution from ENVOY, whose results are included for the entire September quarter. Total electronic transactions were approximately 487 million in the third quarter, compared to 274 million in the second quarter of 2000, representing an 78% increase.
Physician Services revenue was $29.0 million, accounting for 19% of total revenue in the third quarter of 2000, an increase of 215% compared to the second quarter of 2000. Physician Services revenue included the revenues from Medical Manager Health Systems from September 12, 2000 to the end of the quarter. At the end of the third quarter there were approximately 185,000 physicians using WebMD's physician office management software products, 167,000 registered physician users of WebMD Practice compared to approximately 128,000 in the second quarter of 2000, representing an increase of 30.5%. Additionally, at the end of the third quarter there were approximately 39,000 administrative users of WebMD Practice compared to approximately 32,000 at the end of the second quarter of 2000, an increase of 21.9%.
Portal Services revenue was $25.6 million accounting for 17% of total revenue in the third quarter of 2000, an increase of 8% from the second quarter of 2000. The growth rate in consecutive quarter portal revenues decreased, as compared to previous quarters, due to a decline in carriage revenues from certain start-up internet-related customers.
Other Products and Services revenue was $13.0 million accounting for 9% of total revenue in the third quarter of 2000 compared to $16.3 million in June 2000 and $16.6 million in September 1999. The decline compared to June reflected the phasing out of certain non-core product offerings.
The net loss for the quarter was impacted by the restructuring charge, the loss on investments and an increase in goodwill amortization from the full quarter impact of the acquisition of Envoy and the acquisition of Medical Manager, CareInsite and OnHealth on September 12, 2000. In commenting on the results for the September 2000 quarter, Anthony Vuolo, Chief Financial Officer, noted, "Although we recorded a charge related to restructuring and integration, the September quarter realized little benefit relating to the first phase of our integration plan which was not approved by the Board of Directors until September 27, 2000. The September quarter represents the high water mark for the cash loss for the Company on a pro forma basis. The benefits of our integration plan are expected to be realized beginning with the December quarter and continuing throughout calendar year 2001."
Outlook
As a result of the combination of WebMD with Medical Manager, CareInsite and OnHealth, the Company has assembled the largest processor of electronic medical transactions in the country, the most highly utilized healthcare internet portal in the United States and a leading position in physician practice management solutions through its Medical Manager Health Systems business and its relationships with other practice management systems vendors. The Company's near-term objectives are to integrate these assets, enhance connectivity between payers, physicians and patients and develop new product offerings that reduce the administrative burden for all of its constituents and provide solutions that allow its constituents better compliance with clinical guidelines and control over patient outcomes. The announcement of the first phase of its restructuring plan was the initial step toward achieving these objectives. As previously announced, the next phase in its restructuring plan is the rationalization of the Company's current products and strategic relationships in light of its near and long term objectives. The Company has identified relationships that represent approximately $130 million in revenues that are currently being evaluated. These relationships are being reviewed in light of several criteria, including profitability, strategic relevance and the impact of future new revenue opportunities available to the Company. Martin J. Wygod said, "We are in the midst of significant discussions with all of our strategic partners in an effort to redefine our relationships so that they make both economic and strategic sense for all parties. We are encouraged by the productive dialogue underway with some of these partners; however, given that many of the details of the arrangements need to be refined or in conflict with other relationships, it is inevitable that some of these revenue streams will be reduced in our efforts to redefine these relationships."
The Company anticipates it will have additional restructuring and integration charges as a result of the rationalization of the Company's products and relationships. The amount of such charges is dependent on the conclusion of discussions with the Company's strategic partners. The Board of Directors of WebMD has approved the relocation of the corporate offices to the New York Metropolitan area. The Company anticipates additional restructuring and integration charges related to this relocation. WebMD will also record an additional non-recurring charge related to the resignation of certain executives. The charge will be predominantly non-cash and relates to the treatment of stock options pursuant to the existing employment agreements.
Marv Rich, President, said, "I am very pleased with the progress achieved in the restructuring and integration process to date. With the new management team in place and the initial period of unrest behind us, we have an enthusiastic organization that is committed to achieving our vision. We are focused on the remainder of 2000 and 2001 as a "building period" and I expect that we will not only exit 2001 EBITDA positive, but also with an infrastructure that can sustain substantial growth rates in revenue with high incremental EBITDA margins given the leverage that will exist within our cost structure."
New Directors Elected to Board of Directors
WebMD also announced today that Paul A. Brooke and Herman Sarkowsky have been elected to the Board of Directors of WebMD to fill two vacancies resulting from recent director resignations, bringing the total number of directors back to thirteen. Mr. Brooke, former Global Head of Healthcare Research and Strategy at Morgan Stanley, is currently the general partner of PMSV Partners, L.P., a private investment firm, a venture partner of MPM Bioventures, a venture capital firm specializing in the healthcare industry and an advisory director to Morgan Stanley Dean Witter and Skyline Partners. Mr. Sarkowsky is President of Sarkowsky Investment Corporation, a private investment company. Mr. Sarkowsky also served as a director of Medical Manager Corporation and its predecessor, Synetic, Inc. from 1989 until Medical Manager's merger with WebMD. W. Michael Long, Chairman of the Board of Directors, said, "We are pleased that Paul and Herman will be joining the Board of WebMD and we look forward to benefiting from their many years of experience in both the healthcare and financial communities."
ABOUT WEBMD
WebMD provides connectivity and a full suite of services to the healthcare industry that improve administrative efficiencies and clinical effectiveness enabling high-quality patient care. The Company's products and services facilitate information exchange, communication and transactions between the consumer, physician and healthcare institutions.
NOTE: All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: future financial results and other projections of measures of future performance of WebMD; the amount and timing of the benefits expected from WebMD's integration plan and of the costs of executing such plan; potential changes in WebMD's business relationships; and future deployment of applications. These statements are based on WebMD's current plans and expectations and involve risks and uncertainties that could cause actual future events or results to be different from those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to: market acceptance of WebMD's products and services; operational difficulties relating to combining acquired companies and businesses; the profit potential of WebMD's strategic relationships and customer contracts; economic conditions and regulatory matters affecting the Internet and healthcare industries; and the ability of WebMD to attract and retain qualified personnel. Further information about these matters can be found in WebMD's Securities and Exchange Commission filings. WebMD expressly disclaims any intent or obligation to update these forward-looking statements.
WebMD CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data, unaudited)
Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30,
2000 2000 1999 2000 1999
Revenue $151,247 $101,074 $28,653 $318,202 $68,906
Operating costs
and expenses:
Cost of operations 108,903 78,194 20,282 246,462 53,714
Development and
engineering 18,975 14,684 6,612 45,233 20,867
Sales and marketing 75,821 62,072 8,255 206,054 18,610
General and
administrative 23,206 15,710 4,013 51,569 9,244
Total operating costs
and expenses 226,905 170,660 39,162 549,318 102,435
Loss from operations (75,658) (69,586) (10,509) (231,116) (33,529)
Interest income, net 9,882 14,064 364 36,775 1,546
Loss before
restructuring and
non-cash charges $(65,776) $(55,522) $(10,145) $(194,341) $(31,983)
Per share $(0.27) $(0.28) $(0.14) $(0.94) $(0.47)
Depreciation and
amortization of
intangibles,
including prepaid
content and services,
deferred compensation,
restructuring charges
and loss on
investments 721,149 462,782 6,964 1,542,353 21,260
Net loss $(786,925) $(518,304) $(17,109) $(1,736,694) $(53,243)
Per share $(3.17) $(2.64) $(0.24) $(8.41) $(0.79)
Weighted average shares
outstanding used in
computing basic and
diluted net loss
per common share 247,873 196,471 70,596 206,462 67,723
WebMD CORPORATION
RECONCILIATION OF CASH LOSS TO NET LOSS
(In thousands, unaudited)
Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30,
2000 2000 1999 2000 1999
Loss before
restructuring and
non-cash charges $(65,776) $(55,522) $(10,145) $(194,341) $(31,983)
Restructuring and
non-cash charges:
Depreciation and
amortization 597,728 416,428 5,119 1,352,866 15,214
Amortization of
prepaid content
and services
included in sales
and marketing 23,572 20,706 62,832
Amortization of
deferred compensation
included in general
and administrative 15,366 25,648 1,845 42,172 6,046
Restructuring charges 44,881 44,881
Loss on investments 39,602 39,602
Total non-cash
charges 721,149 462,782 6,964 1,542,353 21,260
Net loss $(786,925) $(518,304) $(17,109) $(1,736,694 $(53,243)
SOURCE WebMD Corporation
CONTACT: investors, Risa Fisher, 201-703-3415, or rfisher@webmd.net, or Jennifer Meyer, 646-521-9212, or jmeyer@webmd.net, both of WebMD Corporation
URL: webmd.com |
