WebMD Announces First Quarter Results; Loss Before Restructuring and Non-Cash Items Declines 37% From Last Quarter; New Strategic Partnership With Microsoft Completed
PR NEWSWIRE - May 08, 2001 16:01
ELMWOOD PARK, N.J., May 8, 2001 /PRNewswire via COMTEX/ -- WebMD Corporation (Nasdaq: HLTH) today announced financial results for the three months ended March 31, 2001.
Revenue for the March 2001 quarter was $184.5 million compared to revenue of $199.0 million for the December 2000 quarter. Revenue for the March 2000 quarter was $65.9 million. The net loss, excluding restructuring, integration and non-cash expenses, for the March 2001 quarter was ($32.7) million or ($0.09) per share, compared to ($51.8) million, or ($0.14) per share for the December 2000 quarter and ($73.0) million or ($0.42) per share for the March 2000 quarter. The net loss for the March 2001 quarter was ($1.039) billion or ($2.91) per share compared with ($1.349) billion or ($3.75) per share for the December 2000 quarter and ($431.5) million or ($2.47) per share for the March 2000 quarter.
The Company recorded charges related to its restructuring and integration efforts of $208.7 million for the quarter ended March 2001. These charges include (i) a non-cash charge of $133.5 million related to the write-off of intangible assets associated with its original Microsoft relationship recorded as part of the Company's acquisition of WebMD in November 1999; (ii) a non-cash stock compensation charge of $52.0 million related to the resignation of the Company's former chairman and certain other executives during the quarter; (iii) a charge of $18.0 million primarily from severance, additional lease termination costs relating to an extension of the Company's previously announced restructuring initiatives to approximately 1,450 employees and payments made to exit contractual relationships; and (iv) $5.2 million for the quarter ended March 31, 2001 for integration related expenses such as "stay put" arrangements for employees given future termination dates, moving, relocation and outside professional fees which are required to be expensed as such costs are incurred.
As of March 31, 2001, the Company had approximately $661.6 million in cash and marketable securities.
Revenue categories are as follows (in millions):
Q1 2001 Q4 2000 Q1 2000
Transaction services $97.5 $94.1 $31.5
Physician services 65.1 75.1 6.8
Portal services 19.9 24.8 21.4
Other products 2.0 5.0 6.2
Total revenue $184.5 $199.0 $65.9
Transaction Services revenue was $97.5 million for the March 2001 quarter, an increase of 3.6% compared to the December 2000 quarter. The increase was attributable to increased transaction volume. Total electronic transactions were 549 million for the March 2001 quarter compared to 526 million in the December 2000 quarter.
Physician Services revenue was $65.1 million for the March 2001 quarter compared to $75.1 million in the December 2000 quarter. The decrease in revenue is primarily attributable to the elimination of revenues related to sponsorship of physician subscriptions for the entire March 2001 quarter as a result of the previously announced revisions to the DuPont and Microsoft relationships.
Portal Services revenue was $19.9 million for the March 2001 quarter as compared to $24.8 million for the December 2000 quarter. The decrease in revenues was attributable to the previously announced restructured relationships with Dupont and News Corporation.
Other revenues were $2.0 million for the March 2001 quarter as compared with $5.0 million for the December 2000 quarter. The decline reflects the continuation of the phasing out of certain non-core product offerings. These other product and service revenues will be fully phased out during 2001.
Operating expenses before depreciation, amortization and other non-cash items were $228.1 for the March 2001 quarter compared to $264.0 million in the December 2000 quarter. Each category of expense declined on both an absolute dollar and a percentage of revenue basis. The reduction in expenses reflects the benefits of both the Company's integration initiatives and the restructuring of many of the Company's strategic relationships.
Interest income was $10.9 million for the March 2001 quarter compared to $13.3 million in the December 2000 quarter. The decline was due to a decline in interest rates during the quarter and to a reduction in cash available for investment.
The loss before restructuring, integration, depreciation, amortization and other non cash charges was ($32.7) million for the March 2001 quarter compared to ($51.8) million for the December 2000 quarter and ($73.0) million in the March 2000 quarter. In commenting on the results for the March 2001 quarter, Anthony Vuolo, Chief Financial Officer, observed, "The results for the March 2001 quarter reflect the continuing efforts to integrate the acquired companies and achieve the benefits originally contemplated by these acquisitions. The loss before restructuring, integration and non-cash items declined by 37% compared to December 2000 and 55% compared to March 2000. These improvements were attained even though revenues declined compared to the December 2000 quarter. The Company anticipates continued improvement will be achieved throughout 2001."
During the quarter, the Company continued to implement and further refine its restructuring and integration plan. As a result of the opportunities afforded from the revisions to certain contractual arrangements and the efficiencies created by the initial consolidation and streamlining, the Company has identified an additional 350 positions to be eliminated and the impacted employees have been notified. To date, approximately 1,000 of the 1,450 positions identified have been eliminated and the remainder will be eliminated by the end of the calendar year. Marv Rich, President, said, "I remain enthusiastic about the progress of our restructuring and integration. We anticipate a continued decline in our operating expenses and remain confident that we will finish the year with a positive exit rate and that we will have created an organization with the infrastructure necessary to achieve significant growth rates in 2002 and beyond."
Several strategic relationships were favorably revised during the quarter including Microsoft Corporation, IDX Systems Corporation and Allscripts Healthcare Solutions. Martin J. Wygod, Chairman and CEO of WebMD, said, "We have worked hard over the last six months to evaluate our business and to renegotiate dozens of strategic relationships. I am pleased with the results of this lengthy process and believe strongly that the relationships that we have entered into are financially and strategically sound and will allow us to leverage our strengths and those of our partners to enhance our long-term success. We have been able to create arrangements which better satisfy the objectives of the Company and our partners. By eliminating the obligations and restrictions which would have impacted our future revenue streams, we believe we are now well positioned to capitalize on opportunities which may become available to us."
The new relationship with Microsoft, which was announced on March 22, 2001 based on a non-binding letter of intent, has been completed. The new relationship is comprised of two new agreements, the first of which relates to WebMD's provision of health programming on MSN and the second of which relates to the promotion of Microsoft technology as the core platform for certain of the Company's physician product offerings. These agreements replace the original agreement with Microsoft, which was terminated by mutual agreement as of December 31, 2000. As a result of the revised relationship with Microsoft, WebMD will be the primary provider of health programming on MSN and other Microsoft-affiliated sites, and will receive a majority share of revenue derived from advertising, sponsorship and commerce on the MSN Health site. In addition, the carriage payments and future revenue sharing commitments from WebMD to Microsoft were eliminated along with Microsoft's obligation to guarantee minimum levels of revenue on the MSN Health site and to fund the remaining balance of the five million months of physician subscriptions to WebMD Practice. Under the terms of the technology agreement with Microsoft, WebMD has agreed to adopt the Microsoft PocketPC and other Microsoft technologies for its ULTIA handheld product for physicians and to work with Microsoft to enable Intergy, Medical Manager's next-generation practice management system, to run on Windows 2000 and SQL Server 2000. Microsoft has agreed to provide performance based funding to support the rollout of ULTIA and Intergy as well as consulting services, support and other resources. Finally, WebMD will continue to transition its WebMD portal to certain Microsoft technologies. The technology agreement is still subject to mutual agreement on certain technology-related requirements and the completion of certain ancillary documentation.
The revised relationship with IDX Systems Corporation makes WebMD IDX's provider of electronic claim transactions with commercial payers for physician groups that connect to payers via IDX's eCommerce Services gateway. IDX will also feature to its customers WebMD's full suite of real-time transaction processing services for commercial payers. Under this newly expanded agreement, IDX and WebMD will work together to accomplish their goal of more than doubling the number of electronic transactions currently being generated by the IDX physician user base over the next several years. The 120,000 physicians served by IDX practice management systems will have access through IDX's eCommerce Services to WebMD's suite of transaction processing services including claims, claims status, eligibility, electronic remittance advice, referrals and encounters. The Company's contractual arrangement relating to Channel Health, which was acquired by Allscripts from IDX, was terminated by mutual agreement during the quarter. WebMD agreed to pay Allscripts a one-time payment of $4 million in full satisfaction of all past and future obligations. The agreement relieves WebMD of a multi-million dollar marketing commitment and all previous financial commitments to Channel Health.
Mr. Wygod continued, "Although our restructuring and integration is not fully complete, I am very pleased with the significant accomplishments we have made to date. I expect our financial results to continue to demonstrate this success."
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.
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 financial 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
March 31, December 31, March 31,
2001 2000 2000
Revenue $184,491 $198,951 $65,881
Operating costs and expenses:
Cost of operations 125,344 137,103 59,365
Development and engineering 12,372 13,555 11,574
Sales, marketing, general and
administrative 128,558 168,300 100,526
Depreciation and amortization 759,797 834,120 338,710
Restructuring and integration
charge 208,683 408,038 --
Interest income, net 10,904 13,251 12,829
Net loss $(1,039,359) $(1,348,914) $(431,465)
Basic and diluted net loss per common
share $(2.91) $(3.75) $(2.47)
Weighted average shares outstanding
used in computing basic and
diluted net loss per common share 356,806 359,369 175,041
WebMD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(In thousands, except per share data, unaudited)
Three Months Ended
March 31, December 31, March 31,
2001 2000 2000
Revenue $184,491 $198,951 $65,881
Operating costs and expenses:
Cost of operations 125,344 137,103 59,365
Development and engineering 12,372 13,555 11,574
Sales, marketing, general and
administrative 90,372 113,372 80,814
Interest income, net 10,904 13,251 12,829
Loss before restructuring,
integration and non-cash charges $(32,693) $(51,828) $(73,043)
Per share $(0.09) $(0.14) $(0.42)
Depreciation and amortization of
intangibles, including prepaid
content and services, deferred
compensation and restructuring
and integration charge. 1,006,666 1,297,086 358,422
Net loss $(1,039,359) $(1,348,914) $(431,465)
Per share $(2.91) $(3.75) $(2.47)
Weighted average shares outstanding
used in computing basic and
diluted net loss per common share 356,806 359,369 175,041
WebMD CORPORATION
RECONCILIATION TO NET LOSS
(In thousands, unaudited)
Three Months Ended
March 31, December 31, March 31,
2001 2000 2000
Loss before restructuring,
integration and non-cash charges $(32,693) $(51,828) $(73,043)
Non-cash charges:
Depreciation and amortization 759,797 834,120 338,710
Amortization of prepaid content
and services included in
sales and marketing 8,175 24,641 18,554
Amortization of deferred
compensation included in
general and administrative 30,011 30,287 1,158
Restructuring and integration
charge 208,683 408,038 --
Total non-cash charges 1,006,666 1,297,086 358,422
Net loss $(1,039,359) $(1,348,914) $(431,465)
WebMD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
March 31, December 31,
2001 2000
Assets
Cash and cash equivalents $559,167 $490,797
Short-term marketable securities 81,401 --
Accounts receivables, net 179,149 195,071
Assets held for sale 214,556 214,556
Other current assets 34,469 44,209
Total current assets 1,068,742 944,633
Marketable securities 21,028 219,686
Property and equipment, net 76,276 90,356
Prepaid content, services and
distribution 114,378 229,081
Intangible and other assets, net 6,062,374 6,971,875
Total Assets $7,342,798 $8,455,631
Liabilities and stockholders' equity
Notes and accounts payable $20,293 $19,563
Accrued expenses 275,723 272,932
Deferred revenue 48,962 45,891
Total current liabilities 344,978 338,386
Long-term liabilities 14,057 25,260
Stockholders' equity 6,983,763 8,091,985
Total Liabilities and
Stockholders' Equity $7,342,798 $8,455,631
Note: Certain reclassifications have been made to the prior year Condensed Consolidated Balance Sheet to conform with the current period presentation. These reclassifications had no effect on previously reported financial position. |
