WebMD Reports Disappointing 3rd Quarter
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WebMD's third-quarter results fell short of analyst projections. The site, which links doctors, patients and insurance companies, reported a net loss of excluding restructuring charges of $65.8 million, or 27 cents per share. Analysts had been expecting a loss of 22 cents per share.
The financial letdown is attributed to the integration of four recently acquired companies, according to Martin J. Wygod, CEO of WebMD. "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 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," he said. "These transactions have been accounted for as purchases and are included in the financial results."
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," Wygod said.
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. 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 percent and compared to revenue of $28.7 million reported in the third quarter of 1999.
According to Wygod, a restructuring plan is in the works. "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 the recently acquired companies," he said.
"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," he said.
"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," Wygod added.
The net loss excluding restructuring charges and non-cash charges, for the nine months ending September 30, 2000, was $194.3 million, or 94 cents per share compared to $32 million, or 47 cents 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 79 cents per share for the nine months ended September 30, 1999.
Although analysts were disappointed with the wider-than-expected loss, they said Wygod, an industry veteran, was a performing well at the helm.
"Wygod is courting payers and focusing more on business-to-business rather than business-to-consumer," said Rachel Terrace, an analyst with Jupiter Research. "And he has the name and clout to make these relationships happen."
As of September 30, 2000, the company had approximately $817,800,000 in cash and marketable securities.
In related news, the company's board approved the relocation of the corporate offices from Atlanta to the New York City area. The company expects additional restructuring and integration charges related to this move. Analysts have speculated that WebMD will move to Medical Man