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WebMD Health Corporation (WBMD)

Q3 2010 Earnings Call Transcript

November 3, 2010 4:45 pm ET


Risa Fisher – IR

Wayne Gattinella – CEO & President

Tony Vuolo – COO & CFO

Marty Wygod – Chairman


Mark Mahaney – Citi

Ingrid Chung – Goldman Sachs

Mark May – Needham & Company

Gerard Hayman – JPMorgan

Corey Tobin – William Blair

Sandy Draper – Raymond James

James Kumpel – Madison Williams

George Askew – Stifel Nicolaus



Good afternoon, and welcome to the WebMD Health Corp. September 2010 quarterly conference call. Today’s call is being recorded.

I would now turn the call over to Risa Fisher, Vice President of Investor Relations. Ms. Fisher, you may begin your conference.

Risa Fisher

Good afternoon. This conference call is to discuss WebMD’s third quarter results. The earnings release issued today by WebMD is available at www.wbmd.com in the Investor Relations section. The release includes reconciliation between GAAP and non-GAAP financial measures which will be discussed during the call.

The explanatory paragraphs in the release concerning forward-looking disclosures and related risks and uncertainties also apply to forward-looking disclosures made during this call, including those regarding our guidance on future financial results and other projections or measures of WebMD’s future performance. Information concerning the risks and uncertainties can be found in WebMD’s SEC filings.

Joining us on today’s call are Marty Wygod, Chairman of WebMD; Wayne Gattinella, CEO and President; and Tony Vuolo CFO, and COO.

At the conclusion of our prepared remarks we will open the call and take questions.

Now I’d now like to turn the call over to WebMD’s CEO and President, Wayne Gattinella.

Wayne Gattinella

Good afternoon. The strong financial and operating performance that we announced today underscores WebMD’s continued momentum in providing the most valuable brand of health and wellness information in the marketplace today. Overall, our revenues this quarter increased by 21% over the same period last year, with online advertising revenues increasing by 26%. Our adjusted EBITDA increased 46%, and the margins on incremental revenues reached nearly 60%.

The latest issue of Forbes magazine ranks WebMD No. 5 on their list of the 100 Best Small Companies in America, based in part on our strong sales and earnings growth.

The significant scale and strong engagement of the WebMD consumer and physician audiences are clearly drawing more dollars from traditional marketing channels as the transformation to digital marketing in the healthcare sector takes hold, both in the biopharma as well as in the consumer products markets.

Today, less than 5% of the $30 billion of health-related marketing spent annually is online. Whether this growth reflects the increasing shift of pharmaceutical marketing to the web, as regulatory scrutiny continues to challenge the effectiveness of conventional consumer media and the reduced time and access that detail reps have to physicians is driving the need for alternative channels. The macro trends in the biopharma as well as in the consumer product industry provide a strong tailwind for WebMD’s continued growth.

Traffic to our WebMD network of sites continued to expand this quarter (technical difficulty) reaching an average of 83.3 million uniques per month, an increase of 41% over a year ago on our owned and operated, as well as a new affiliate site that we brought on earlier this year, drugs.com.

Page use during the quarter grew by 23% to 1.8 billion pages. Importantly, more than 90% of our inventory is delivered on WebMD branded sites that we own and operate with full control of the editorial content as well as the pricing.

Our Professional Network with Medscape.com as the flagship site continues to draw increasing numbers of physicians. Online traffic to our Professional Network during the third quarter exceeded 2 million monthly physician visits.

Consumers and physicians continue to rely on WebMD to answer their health-related questions, more than any other resource, even more than the largest search engines. And even when consumers do use search engines for health related searches, the top searches are consistently for WebMD or some variation on our brand.

For the remainder of keyword searches, WebMD sites now rank on the first page of natural search results for over 430 of the top 500 health-related search terms.

In the third quarter, approximately 1.5 million medical education programs were completed on our professional sites, down slightly from the prior year. As we’ve discussed previously, we are putting less emphasis on programmed unsponsored medical education programs and putting greater emphasis on broader medical news and issues that are important to the business of medicine.

On the heels of moderating a live webcast in July, we were selected again in September by the Department of Health and Human Services to moderate an online video session with Secretary, Kathleen Sebelius to answer consumer questions on the changing coverage guidance under health reform.

Also in the third quarter, WebMD was awarded a contract by the Centers of Medicare and Medicate services, CMS to deliver an extensive online physician education program on Medscape regarding the financial incentives that CMS will make available to physicians who implement electronic health records in their practice.

The Medscape program will educate healthcare providers on how health information technology will lead to a more efficient and transparent health system through lower cost and increased quality. WebMD’s investment in new technology platforms continues to transform how people connect with health information.

Our new programming platform has made interactive and video integration a fundamental part of the WebMD user experience. Our personalization platform is driving a deeper level of engagement by more closely aligning a person’s health needs with the overall content experience.

Read the rest of this transcript for free on seekingalpha.com