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WebMD Refreshingly Healthy

Posted on Thursday, Mar 12th 2009

In times when most companies are either reducing their outlooks or even refraining from giving them, health portal WebMD, one of my favorite Internet stocks , not only announced Q4 results that beat the market’s expectations but also reaffirmed its 2009 outlook.

Q4 revenues of $111.5 million exceeded the Street’s expectations of $106 million and recorded annual growth of 15%. EPS of $0.23 also beat the market’s expectations of $0.18 though it recorded a decline of 32% over the year.

By segment, advertising and sponsorship revenue increased 21% to $85.3 million, contributing 76% of total revenue. Private portal licensing revenue increased 8% to $23.2 million while publishing and other revenue decreased by $1.6 million to $2.8 million.

WebMD reaffirmed their outlook of $420-$450 million in annual revenue, which would be growth of 10-18% over the year with EBITDA growing by 11-26% to $107-$122 million. For the coming quarter, they are looking at revenues of $90-$92 million with adjusted EBITDA of 19%.

During the current quarter, WebMD has seen a significant shift in their customers’ advertising strategies as their largest pharmaceutical and consumer packaged goods customers move from low-cost, low-quality ads towards fewer high-impact media properties such as WebMD itself. Traffic to their health network grew by 21% over the year to a record 54 million unique users per month. Page views during the quarter grew by 30% to nearly 1.3 million.

As online medical education continues to replace traditional sources, WebMD also saw significant growth in Medscape as the leading source of medical information for physicians, with their reach exceeding 1.5 million monthly physician visits in the quarter. Online medical education reached a record 1.5 million programs during the quarter with a total completed continuing education (CE) programs growing by 68% over the year to 5.2 million for 2008.

In continuation of their online promotion strategy launched earlier last year, in the current quarter they expanded the use of multimedia, personalization and community in their consumer and professional sites to improve the user experience and create new sponsorship opportunities and inventory. In December they launched a new Healthy Eating and Diet Center that integrates all the key aspects of Web3.0 –  content, expert guided communities with a comprehensive set of personalized food and fitness tools.

Recently, they announced a programming partnership with the US Food and Drug Administration (FDA) to support a new FDA center on WebMD that will deliver updated safety information on food, cosmetics and medicine as well as related WebMD content and links to the FDA’s consumer site.

They continued to innovate and invest in infrastructure to reach the next level of growth. In the fourth quarter they launched their first set of consumer mobile applications on the Apple iPhone and in just the first three months saw over 350,000 downloads of their mobile version of the WebMD Symptom Checker and Treatment Information.

The stock rose 16% after the results announcement to $23.44 and is currently trading at $23 levels with a market capitalization of $1.31 billion. Given the current market valuations, it might be a good time for WebMD to buy some companies. One that I recommend heavily is Epocrates, which you can read about in this interview with the company’s recently departed CEO, Kirk Loevner.

At any rate, it is wonderful to see some good news in this sordid market.

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