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Executives

Risa Fisher

Cavan M. Redmond - Chief Executive Officer, Director and Member of Executive Committee

Anthony Vuolo - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Martin J. Wygod - Chairman, Member of Executive Committee and Member of Strategic Planning Committee

Analysts

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Jordan Monahan - Morgan Stanley, Research Division

Scott H. Kessler - S&P Equity Research

Steve Rubis - Stifel, Nicolaus & Co., Inc., Research Division

Andrew Marok

Mark May - Barclays Capital, Research Division

Jeffrey Garro - William Blair & Company L.L.C., Research Division

Alexander Y. Draper - Raymond James & Associates, Inc., Research Division

WebMD Health (WBMD) Q4 2012 Earnings Call February 21, 2013 4:45 PM ET

Operator

Good afternoon and welcome to WebMD Health Corp.'s Fourth Quarter 2012 Conference Call. Today's call is being recorded. I will now turn the call over to Risa Fisher, Vice President of Investor Relations.

Risa Fisher

Good afternoon. This conference call is to discuss WebMD's fourth quarter results. The earnings release issued today by WebMD is available at www.wbmd.com in the Investor Relations section. The release includes reconciliations between GAAP and non-GAAP financial measures, which will be discussed during this 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; Cavan Redmond, Chief Executive Officer; and Tony Vuolo, Chief Financial Officer. At the conclusion of our prepared remarks, we will open the call and take questions. Now I'd like to turn the call over to our CEO, Cavan Redmond.

Cavan M. Redmond

Good afternoon, and thank you for joining us today. I'm pleased to be able to share our progress with you. I want to provide you with some insights as to how our fourth quarter concluded and how we see 2013 unfolding.

Our fourth quarter and full year 2012 came in with revenue at the high end of our range that we previously provided in November, and adjusted EBITDA exceeded the high end of that range. While it's still clearly a very challenging market for us, we're beginning to see indications that the steps we are taking are showing some effect on our existing revenue streams and creating a clear foundation for more diverse revenue streams and sustainable long-term growth.

Our fourth quarter traffic demonstrates our leadership position. During the quarter, the WebMD Health Network reached an average of 117.4 million monthly unique visitors and delivered 2.57 billion page views, increases of 28% and 20% over the prior year period, respectively. The prior year comparisons exclude traffic from WebMD's former affiliate partner sites, which were phased out at the end of 2011. We have discussed -- as we have discussed in the past, our traffic growth is being driven by increased mobile utilization. During the fourth quarter, traffic to Medscape, our Professional Network, averaged approximately 3 million physician visits per month.

As many of you are aware from press reports, Google has made some recent changes in its search algorithms. I wanted to give you our current assessment of its effect on the health category. The Google updates made in December and January are having a mixed effect on our traffic. We have observed that traffic to our flagship site webmd.com has increased, but we have seen a more-than-offsetting decrease in some of the other sites that we publish. We are looking at ways to address this, but our overall page view growth rate in the first quarter will be less than in prior year -- in the prior year period.

When we look at the available third-party data, we observe that other health sites are also experiencing either reduced or negative page view growth since the beginning of the year. This slowdown in our page view growth should not represent any problem from a revenue perspective as we believe we have more than ample traffic to support revenue beyond our current expectations.

Innovation is a key driver for WebMD, and combining it with our highly engaged audience, scale and analytic capabilities differentiates our digital media solutions. An example is a program we began late last year. In a very severe flu season, our data provided valuable information on both severity and geographical prevalence of flu to our customers weeks in advance of other information sources. This is one example of how we go beyond traditional audience targeting, and it is these capabilities that we will continue to develop throughout 2013.

When I look at our fourth quarter results, we are beginning to see the positive impacts of our emphasis on operational excellence. During the quarter, we took actions to streamline our operations and reduce costs. We have and will continue to optimize our sales and delivery process to enable better collaboration with our sponsor and agency clients. We are focused on programs that can more quickly navigate our customers' internal review protocols and have shortened development timelines.

During the fourth quarter, we took the step of -- difficult step of eliminating approximately 250 positions. I especially want to thank the employees across the organizations who really pulled together as a team to continue our progress without business disruption. We entered 2013 as a more nimble organization that is well positioned to meet the needs of our users, clients in a dynamic and demanding marketplace.

Today, we issued 2013 financial guidance for revenue of $430 million to $455 million and adjusted EBITDA of $60 million to $80 million. While our biopharma customers are still dealing with the combination of the impact of patent expirations, generic substitutions and unanticipated delays in new product launches on their earnings, I am encouraged by recent indications that trends are improving for some of our clients in 2013.

As I mentioned in our last call, our customers indicate they have approximately 7 months' view into their purchasing decision. As a result, we are beginning to change our -- we are beginning to see a change in our customer buying patterns to shorter duration commitments. These factors have been considered into the 2013 guidance we've provided today.

Our focus is on users, clients and innovation. Strategically, in 2013, our emphasis is on the following areas: First, operational excellence in all that we do. We are eliminating redundancies and have begun to set processes in place to ensure that we are identifying customer needs and providing innovative solutions with timely implementation and delivery. Our biopharma customers needed shorter cycle times, and we have adapted to that. More broadly, our customers need a simplified product and pricing structure, and we are providing that as well.

Second, continued personalization on both mobile and desktop to drive deeper engagement and create additional revenue opportunities. For example, earlier this month, we launched WebMD Allergy, an innovative mobile resource that empowers consumers to take control and proactively manage their allergies. It provides allergy sufferers with personalized location-based allergy condition forecast, in combination with WebMD's trusted information and insight. WebMD Allergy is further personalized with mobile notifications that warn when allergen levels are high, enabling app users to proactively manage their allergy conditions. It includes the ability to track allergy from multiple family members, so parents can take an active role in managing their children's allergies.

In January, we launched the updated Medscape app for iPad and iPad Mini. Health care professionals in all specialties are increasingly integrating mobile devices into their daily workflows to conveniently access information and clinical tools. Medscape is the highest-rated and fastest-growing free medical app among physicians, providing vital information for conditions at the point of care. From streamlined content updates to full optimization across multiscreen platforms, Medscape continues to innovate to better serve the needs of physicians and health care providers.

Shortly, thanks to the innovation of our apps team, we will be launching a pregnancy app to continue our momentum. WebMD Pregnancy brings personalized physician-reviewed information to the expectant mom on a weekly basis. It provides the essential tools to manage her wellness and share her pregnancy journey.

We continue to implement a redesign of our Healthy Living sites, including Beauty; Diet, Food & Fitness; and Family & Pregnancy. During the quarter, we launched a personalized Recipe Finder. Increased personalization and deeper engagement in healthy living is positioning WebMD to better compete for digital spend allocated to lifestyle and non-endemic health care sites.

Strategic -- our third area strategically is investing in a more robust marketing science and analytic platform. This includes adding new capabilities in order to generate deeper audience insight, better differentiate our media and sponsorship products, and provide our customers with innovative forms of measurements that clearly demonstrate ROI. We have begun development of an integrated data platform, which leverages our site experience with multiple sources of third-party data. These capabilities will power our new WebMD analytics lab, which will deliver unique insights on how users interact with health care information, both digital and nondigital, and provide a perspective on resultant actions, such as consultation with health care providers and product purchase decisions.

Fourth, as the Affordable Care Act, or ACA, is implemented, it will create new opportunities that WebMD is well positioned to compete for. WebMD's strength, as we go -- as the go-to brand for consumers, patients and caregivers is the basis for building new opportunities related to ACA. The expected changes in how and where health care is delivered, how it is paid for, and how individuals and their families must navigate these changes, creates a natural extension to our brand. As tens of millions of consumers will be shopping for health insurance in a new open market, we are well positioned to leverage our broad reach to enable payers to reach potential customers, as well as enable consumers to leverage our platform in this key health care decision.

We are investing this year to build audience, engagement and product offerings for consumers in order to build new customer segments like provider systems and health insurance. Additionally, as physician, hospitals and payer landscape changes, the need for customer-centric sophistication WebMD provides is a natural fit into our future product offerings.

And lastly, in 2013, we will be investing in building the foundation to connect consumers and patients to physicians and other health care providers. Leveraging our unmatched audience, we are developing applications to provide timely information and interaction to the patient and physician health care continuum. We expect to introduce initial applications later this year.

With respect to our private portal business. During the fourth quarter, we launched 2 more conditioned areas that round out our total population management solution. We now have condition management tools to top 5 -- to the top 5 areas, including coronary artery disease, congestive heart failure, diabetes, chronic obstructive pulmonary disease and asthma. We believe this will enable us to compete for a substantial number of RFPs from Fortune 500 companies, midsized health plans and government opportunities that were previously unavailable to us.

Within the private portal space, we continue to see competition from large insurers, and we expect customer attrition in 2013. But we believe we can offset that over the course of 2013 with continued expansion of existing accounts and the addition of new customers.

In summary, we are seeing some initial data points which are certainly encouraging given the current environment. We will continue to remain focused on operational excellence to drive internal improvements while driving a strategy that builds on our current strengths and expands into new areas of opportunities.

I'd like to turn it over to Tony at this time to run through our financial results and guidance for 2013.

Anthony Vuolo

Thanks, Cavan. Our revenue for the fourth quarter was at the high end of our financial guidance we issued in November, and our adjusted EBITDA exceeded the high end of that guidance.

Fourth quarter revenue was $132.7 million compared to $150.7 million last year. Public portal advertising and sponsorship revenue was $112 million compared to $130.8 million in the prior year, and private portal services revenue was $20.5 million compared to $19.8 million in the prior year. Fourth quarter adjusted EBITDA was $30 million or 23% of revenue compared to $54.6 million or 36% of revenue in the prior year period.

As Cavan discussed, during the quarter, we took actions to streamline our operations, reduce cost and better focus our resources on key initiatives. As part of this program, we had a workforce reduction of approximately 250 positions. The majority of these positions were eliminated as of the end of December. The remaining positions as well as the non-workforce-related cost savings are being implemented over the first quarter. As a result, we took a charge related to this restructuring of $7.6 million in the fourth quarter.

Our estimated expenses for 2013 are approximately $35 million to $40 million lower than the fourth quarter of 2012 expenses annualized. This reflects the benefits of our cost reduction efforts, offset in part by new investment in the areas that Cavan mentioned. For those of you who are building models, the savings are weighted similarly to the current breakdown between noncash expenses in cost of operations, sales and marketing, and G&A.

The income tax provision for the fourth quarter was $5.5 million. Included in the provision is a noncash income tax expense of $4.7 million related to an increase in our valuation allowance for certain research and development tax credits whose utilization before their scheduled expiration is uncertain.

Fourth quarter net loss of $6.1 million or $0.12 per diluted share compared to net income from continuing operations of $19.2 million or $0.33 per diluted share in the prior year period. Fourth quarter net loss would have been income of $4.1 million or $0.08 per diluted share in the current period as compared to net income of $18 million or $0.31 per diluted share in the prior year period, without the effect in the current year period of an after-tax restructuring expense of $5.5 million, the noncash income tax valuation allowance of $4.7 million and in the prior year period, an after-tax gain on investments of $2.5 million and after-tax transaction cost of $1.3 million.

Operating cash flow from continuing operations was $26.8 million for the fourth quarter and $70.8 million for the year. As we stated in the past, quarterly operating cash flows can be impacted by the timing of compensation accruals, other accruals in relation to quarter's end, the timing of interest payments on the convertible notes and the billing and collection of receivables from our customers. Capital expenditures were $6.1 million for the quarter and approximately $35 million for the year.

During the fourth quarter, we used approximately $1.5 million of cash to repurchase 110,000 shares of our common stock under our authorized share repurchase program. There's approximately $62 million remaining under our authorized buyback program. As of December 31, 2012, we had $992 million in cash and cash equivalent.

Today, we issued financial guidance for 2013. The schedule summarizing this guidance is included in today's press release. Our guidance reflects the anticipated savings we expect to achieve in 2013 from the restructuring actions we initiated in the fourth quarter.

For the full year 2013, we expect revenue to be approximately $430 million to $455 million, adjusted EBITDA to be approximately $60 million to $80 million and net loss from continuing operations to be approximately $7 million to $22 million or $0.13 to $0.45 per diluted share.

We expect the weighted average basic and diluted share count for the year to be approximately 50 million. We expect capital expenditures to be approximately $25 million to $30 million for 2013.

For the first quarter of 2013, we expect revenue to be in excess of $105 million, adjusted EBITDA to be in excess of 13% of revenue and net loss from continuing operations to be approximately 6% of revenue.

As you can see from the guidance issued today, we are not expecting to see the same magnitude of historical decline in revenue and earnings between the fourth quarter and the first quarter that we have experienced in the past or that we anticipated in November. We believe the steps that we took in the latter half of 2012 in response to our customers' limited visibility into their budget had an effect on our improved outlook. We made our products and pricing simpler for advertisers and modified our sales and product approach to reflect shorter duration commitment able to be executed quickly.

Our guidance reflects the challenging and changing marketplace. Our biopharma customers continue to deal with the financial impact of patent expirations and resultant generic substitution, launch delays and budget cuts. This affects their spending on our core offerings, consumer marketing, physician marketing and medical education. We have considered these factors in the guidance we issued today. Our guidance does not include the impact, if any, of future deployment of capital for items such as share repurchases or acquisitions, gains or losses from discontinued operations or other nonrecurring onetime or unusual items.

Now I'd like to pass the call over to Marty for some closing comments before we open the call up for questions.

Martin J. Wygod

Thank you, Tony. As Cavan and Tony commented, we are beginning to see positive results from changes we implemented in 2012. I am encouraged that we have contracts in place to play a unique and integral role in the launch of new pharma products. The timing of these are subject to product regulatory approval. I currently expect that they, along with other opportunities, will begin to contribute to our revenue probably in early 2014, more so than the latter part of this year.

When we look at creating new revenue streams, I am optimistic, though, that we are well positioned to capitalize on the opportunities presented by the changing health care environment. As highlighted earlier, millions of consumers will be entering a new health care market for the first time, which presents significant marketing information and decision support needs, not only for consumers, but for insurance companies and providers as well.

The trends affecting health care providers are accelerating, and innovative solutions are required to meet their changing needs. Consolidation is impacting physicians, hospitals and delivering networks, and more and more providers are taking on financial risk. This creates the challenge and need to attract and retain patients, and keep them healthy with proactive, cost-effective health management programs.

As the most trusted provider of health information today, we are well positioned to compete in these new areas by leveraging our reach to consumers and physicians, our market-leading decision support platform and our expertise in wellness management. Our assets, together with our strong balance sheet, will allow us to take full advantage of acquiring or venturing with companies that can assist us in providing solutions to fulfilling these changing needs. We are actively pursuing opportunities to create incremental long-term growth. Operator, at this time, we'll take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Peter Stabler from Wells Fargo.

Peter Stabler - Wells Fargo Securities, LLC, Research Division

So looking at the traffic and engagement metrics, they look pretty positive, yet guidance suggests another weak year, the obvious conclusion here being that pricing continues to be unstable. Can you comment on the competitive landscape, Cavan, and give us a sense of what you think is going to help you combat that? Or what kind of levers do you have to pull to change the trajectory of pricing? And then I have a quick follow-up.

Cavan M. Redmond

Sure, thanks, Peter. I'd answer it in 2 different steps. The first is I think the changes we made in the fourth quarter, and that will continue on the operational excellence side, is really focusing on delivering short -- essentially, shorter-duration products to our customers. And we believe that, that is something that will have an effect. We did adjust our rate cards and our value delivery as necessary, so we think that the changes we made in the latter part of the fourth quarter will give us the anticipated results in 2013. What balances all of the changes that we're making is it's still a challenging environment, especially when we look at the biopharma customers and the uncertainty that those customers have in relation to their budgets and their planning year. So when we take a look at the opportunities, we think some of the strengths we're coming into 2013 with have to be balanced with those changes that they're seeing and essentially their long-term visibility.

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Okay, great. And then could you give us some color on the trajectory of Medscape versus the consumer sites? Any additional view there will be helpful.

Anthony Vuolo

This is Tony, Peter. Yes, when it comes to -- on the pharmaceutical side, we're seeing the same factors affecting their budgets, both on the consumer and on the professional side of the business. As I mentioned in my comments, the -- given what they're going through, their expenditures, whether they be for consumer marketing, physician marketing or medical education, we believe, are being similarly impacted by the environment. So from a pharmaceutical company perspective, the challenges really span the multiple services that we offer.

Peter Stabler - Wells Fargo Securities, LLC, Research Division

So we should draw from that, that the Medscape growth is similarly impacted here as the consumer portal?

Anthony Vuolo

Yes. I think that in terms of the market dynamics, they equally apply to the professional side as well as the consumer side.

Operator

Our next question comes from Jordan Monahan from Morgan Stanley.

Jordan Monahan - Morgan Stanley, Research Division

I guess just 2 questions. The first is, one, maybe digging a little bit deeper on the competitive front. Are there competitors that you might not have considered competitors potentially a couple of years ago? Are there new emerging businesses that aren't specifically health care focused that may be contributing a bit to some of the continued pricing weakness? That's the first. And then the second is just around costs and expenses. I guess when we're looking at the guidance, we're having a little bit of trouble figuring out exactly where the leverage is coming from, and I'm wondering if you might be able to give us a little more detail.

Cavan M. Redmond

Yes, sure. This is Cavan. Let me have Tony answer the second, and let me take the first one on the competitive front. When I look at the competitive front and you look at the last couple of years, I'd say the landscape has changed, where essentially, historically, the endemic health care sites, and if you will, general sites both enjoy different, if you will, different market segmentations and different opportunities. In today's world, we're seeing that essentially, people who have traditionally marketed into endemic health also take a look at healthy living and lifestyle and other areas as opportunities also. And that's one of the reasons that we've built out and strengthened our Healthy Living site. So I do think that we've seen, if you will, a change in general competition from where we go, but you also have a large amount of inventory on the market from the companies like Facebook and other sites that have come through that historically may not have been considered for advertising but are now a part of those mixes, and as we move forward, part of our competitive environment and some of the reasons we've taken the changes that we've made. Tony?

Anthony Vuolo

Yes. And on the -- in terms of -- you're asking how to kind of like model the cost savings from an income statement classification perspective. If you look at the distribution of the noncash expenses between -- for the fourth quarter between cost of operations, sales and marketing, and G&A, as I commented, those cost savings would pretty much be weighted to the same distribution and kind of on a percentage basis of total compared to those expenses. So for example, if cost of operations were 50% of the total expenses, 50% of the savings would accrue to that line item.

Operator

Our next question comes from Scott Kessler from S&P Capital.

Scott H. Kessler - S&P Equity Research

It's Scott Kessler from S&P Capital IQ. Cavan, I believe soon after you joined the company as CEO, you mentioned that you were undertaking a strategic review of the company and its businesses. And I'm wondering if you're comfortable indicating that such a process is largely complete. Specifically, I'm wondering if you're considering the strategic options for the private portal business at this point. And I have a follow-up.

Cavan M. Redmond

Yes. Let me comment on the first part of your comment, which is -- your question, Scott, which is the strategic review. When I take a look at what we've been focusing on, both with the marketplace but also our capabilities, we have been focusing on strategically where we want to go, and that's the 4 points we laid out in today's discussion. And I feel very comfortable that those are the areas that we will both focus on and deploy our capital. In addition to that, I think that the focus on operational excellence and essentially how we execute in a competitive marketplace will also be a significant part of how we go to market, both obviously for 2012 but as we go into 2013. In terms of any particular part of our business, right now, we don't comment on any of it. Each of them, we're focused on maximizing.

Scott H. Kessler - S&P Equity Research

Okay, fair enough. I'm also wondering if you could talk about whether you expect further restructuring charges in Q1 and beyond, or do we see essentially most, if not all, of what you're going to accrue in Q4?

Anthony Vuolo

Well, in terms of the restructuring initiative that we undertook in Q4, I don't expect to see any charges in Q1 related to that program. And at this point, we don't have any plans for any further restructuring programs.

Scott H. Kessler - S&P Equity Research

And if I could try to sneak one more in. Marty, you talked a little bit about growth initiatives, and I'm wondering if you could talk a little bit about the decision that seems like you guys have made, which is to build versus buy mobile apps. Obviously, there are a tremendous number of mobile apps and other types of solutions in the marketplace. And I'm wondering if you could maybe talk with us a little bit about how you guys think about that, because frankly, when I see that, I don't understand why you guys just don't identify and start acquiring and consolidating some of the top independent health-driven mobile apps out there, so maybe just some sense of how you guys think about that.

Martin J. Wygod

We're currently totally committed to growing internally, as well as doing it from an acquisition perspective. We're extremely active at this time. We feel the timing is right in a number of the areas as a result of the changes that are currently taking place in the health care environment. And we're moving extremely rapidly at this point to make the necessary external transactions to maximize our long-term growth, as well as providing incremental capital for our internal development.

Operator

Our next question comes from Steve Rubis from Stifel, Nicolaus.

Steve Rubis - Stifel, Nicolaus & Co., Inc., Research Division

We definitely underestimated your performance. I'd like to start as a follow-up to the last question on mobile. Can you talk a little bit about where or what indications you think you can build internally versus where you think you need to go outside in order to better build your mobile portfolio? And then I have a few follow-ups.

Cavan M. Redmond

Sure, Steve. This is Cavan. Let me kind of give you what we're thinking in terms of mobile. I think we have a world-class mobile development team that is combined with incredible editorial capabilities for the mobile platform. So when we've taken a look at strategically what we've started with this, going after areas that we think there's a high level of consumer need, combined with, of course, the ability to generate either sponsorship or advertising revenue, so that combination works, I think, well for us as a start in the mobile area. But when you take a look at what we want to accomplish out of it, remember, mobile is part of our multiscreen platform. It essentially allows gateways into engagement into information and allows people to gather that information where they're looking. So it's an area that we'll continue to look at. As opportunities come up, as Marty said, both externally and internally, we'll evaluate them equally because we have no bias in terms of the way we deploy that capital. But for the next, at least, app launch, those will be things that we developed internally based on where we think the market really has a high degree of needs.

Steve Rubis - Stifel, Nicolaus & Co., Inc., Research Division

Very good. And then what are -- can you give us a little bit of a sense on the early trends on the Pain Coach and the allergy tracker? How are those apps doing? And are people advertising on those apps for instance?

Cavan M. Redmond

Yes, they're advertising. We have 2 main models for our apps in terms of basic advertising or media. One is, of course, just straight advertising, the other is sponsorships. So for both of those apps, we have -- we've got that covered. And in terms of their uptake, their use, downloads and what we expected out of them, I think we're very pleased with their -- them accomplishing what we've set out as goals for them.

Steve Rubis - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then my last question really kind of revolves around your prepared remarks and specifically your guidance and how you've obviously changed your view that you don't see the same sequential decline from the fourth quarter to the first quarter. And I just wanted to drill down into that to make sure that -- it sounds like it was a pricing issue. And if it was, how nimble are you in terms of being able to change pricing going forward? And why did it take so long in order to address the price issue?

Cavan M. Redmond

Yes, Steve, I'd actually not -- I would not pin it to one issue and I certainly wouldn't pin it to just pricing. I think that when I look at what we concentrated on in the fourth quarter and the incredible work that the teams internally have done, it's really focusing on what the customers need, what their cycle times are, what our delivery times are and being able to meet that. Now there were pricing adjustments made, but there were also rate card adjustments made. But that really goes to essentially just a piece of the overall changes. So I don't believe that it was simply a matter of just changing a number and then essentially, the business had an impact. I think it was multifactorial, which really included understand the market, shorter delivery times, beginning to change our internal processes and being very customer focused. And Tony, did you...

Anthony Vuolo

I mean, the one thing I would add is a lot of what we did was we changed the structure of how we price and unbundled a lot of our pricing. In the past, we would put together programs and we would create a price for the whole program. Now we're giving our clients more options in terms of the assets that can be a program and unbundling the pricing. So there's more transparency. So it also -- aside from allowing the clients the flexibility to decide what assets they may want in a program, it certainly makes it -- makes us easier to compare to others when they try to compare the relative aspects of a program.

Operator

Our next question comes from Kevin Kopelman from Cowen and Company.

Andrew Marok

This is Andrew Marok on for Kevin. I just had a couple questions on your mobile traffic. What percentage of your page views came from mobile, and if you had any breakout between your apps and your mobile web and smartphone and tablet? Then I have another question after.

Anthony Vuolo

For the fourth quarter, I think about 30% of our page views came from mobile traffic. I don't have in front of me the breakdown between apps and web. It's primarily going to be mostly mobile web and mostly smartphone, although the tablet is certainly increasing. So I hope that's responsive to your question.

Andrew Marok

Yes, that's great. And then just on the revenue guidance, looking at Q1, guidance suggests about a 2% year-over-year decline, while full year guidance suggests about a 6% year-over-year decline at the mid-point. I was just wondering how you guys are looking at the sort of progression of revenue growth throughout the year.

Anthony Vuolo

Well, as we said in the prepared comments on the call, there's a lot changing. We've certainly changed our emphasis in terms of our product offerings in response to our clients' limited visibility into their own budgets, et cetera. So the programs are becoming shorter duration. So in combination with that, with the marketplace, where there's still not a lot of certainty in regard to what total expenditures are for the year, we have a lot of moving parts to our guidance, and we considered that in terms of our annual range. So we're encouraged about the first quarter, but we don't have a lot of history there. And so when we developed our annual range, we took into account the dynamics of the marketplace, particularly with our pharmaceutical customers.

Martin J. Wygod

We're also not projecting a 2% decline in the first quarter. What we're saying, in excess of $105 million. And what did we do on the first quarter last year, Tony, $107 million?

Anthony Vuolo

Yes, it was about $107 million.

Martin J. Wygod

And we'd be very surprised if we're below that.

Operator

Our next question comes from Mark May from Barclays.

Mark May - Barclays Capital, Research Division

I think most of mine have been answered. I guess on the split between Medscape and WebMD, if it's true that both the sites have been relatively evenly or equally impacted over the last year or 2, it sounds like, Cavan, in your earlier remarks, a lot of the initiatives and focus around product, I think it was your point number 2 of 3 around product enhancements, seemed a lot to be focused on more of the consumer or WebMD side of the business. Is that -- how should we be thinking about that? Is that a reflection of where you think the greater opportunity is? Or is it just that you have more control over changing and enhancing the trajectory of that business versus the Medscape business?

Cavan M. Redmond

Yes, Mark, I think I may look at slightly different in the prepared remarks because when I look at -- there's a couple of things. When I look at the marketing science area and the focus on sort of a WebMD analytics lab, that hits both businesses equally because the understanding of -- or using data to understanding what's happening in health care is equally important for health care providers as it is on the consumer side. So I'd say that's a little bit of both. I think on the Affordable Care Act, I also view it as very much a consumer play in terms of consumer and health care -- or people who are looking for health care solutions, but a part of that has to include what health care professionals are doing, especially when you think about their association with hospitals and with other changes in the provider system. And then finally, the connectivity that I mentioned between patients and physicians, which is really a way of thinking about taking our strength in Medscape and our strength in WebMD and providing ways that those 2 groups can link up in a meaningful way, very much involves both. So when I look at it, the bulk of what we do is taking a look at our total user base, whether it's consumers or professionals, and identifying ways to leverage them. Different timing for some maybe or different magnitudes, but I think that overall, we look at them both as an integrated solution.

Anthony Vuolo

And the only thing I would add to that is in terms of our comments and what we've done from a product and pricing structure perspective, we've done that across the whole portfolio, both on the pharma consumer side, on the professional side and on the CPG side. So we didn't intend to signal that it was just changes in the pharma consumer side.

Operator

Our next question comes from Jeff Garro from William Blair & Company.

Jeffrey Garro - William Blair & Company L.L.C., Research Division

Just a quick one on the timing of savings. I'm trying to figure out if the $35 million to $40 million in annual savings or annualized savings that you mentioned, are we going to see that fully hit in Q1? Or will it be Q2 before we see the full financial impact of the savings?

Anthony Vuolo

I think you'll see a fair amount of it in Q1, there's still some savings that we have yet to achieve. But if you just notice in terms of our guidance, our adjusted EBITDA percentage compared to last year is increased compared to Q1. So I think we will see a fair amount of it in Q1, and then a lot of the investment initiatives that Cavan mentioned will phase in throughout the year.

Operator

Our next question comes from Sandy Draper from Raymond James.

Alexander Y. Draper - Raymond James & Associates, Inc., Research Division

Hopefully, you can hear me, I apologize. I'm unfortunately fighting a cold here, so I may go out on you a little bit. First question, and I think it's sort of been asked, just want to verify. Tony, when you're thinking about the first quarter guidance and then the ramp-up through the rest of the year, looking at your guidance, it looks like there's a more conservative ramp than you would typically see. Am I understanding it right, that you said that, that's somewhat due to conservatism as you have shorter contracts and you don't want to get -- you don't have the multiquarter visibility you have sometimes in previous years? Is that an accurate assessment?

Anthony Vuolo

Well, we certainly don't have the longer-term visibility that we've had in previous years given the steps that we've taken in response to our customers' own visibility as I -- I don't know I would characterize it as conservative. We just factored -- we've considered that in terms of our annual guidance.

Alexander Y. Draper - Raymond James & Associates, Inc., Research Division

Okay, that's helpful. And then second, I think probably for Cavan, when you're talking about the challenging environment, is it pretty much across all customers? Are you seeing some customers who are starting to move forward as they're getting through some patent cliff issues and getting a better pipeline, and so you're seeing a few people who are moving and others aren't? But just any more thoughts there, because as I look at other service companies that I cover that are dealing with pharma, it seems like in pockets, they're starting to get more clarity, and so I'm just wondering if you would say there's still broad-based no clarity for you or it's a company-by-company type of situation?

Cavan M. Redmond

Yes, Sandy, I'd answer it this way. When I look at it, I look at it on a company-by-company basis because in the end, that's who our customer is. And I would say that there are pockets where we've seen some strength and are encouraged. There are others, of course, who are still going through some pretty significant transition. And then the wild card in the market right now is product approvals because they affect current infrastructure and future investments. But I'd say that as I look at 2013, it's much more of a customer-by-customer look for us, and that's where we're seeing some pockets, where we see some encouragement with the caution of, of course, if we look at the market in general, it's a challenging market.

Operator

Our last question comes from Peter Stabler from Wells Fargo.

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Just a quick one on the web analytics lab. Improving your ability to deliver analytics and a view into ROIs and something that's been mentioned on a number of calls now, we're just trying to understand kind of exactly what you mean here. Our impression has been that typically marketers and their agencies are the ones who are carrying most of the burden in terms of analyzing the returns on their investment rather than the publisher. So if there's any kind of special tools that you're developing here, you can help us understand what those -- how those are constructed and how they could help you, that would be great.

Cavan M. Redmond

Sure, Peter. So I'd characterize it, and this would be a broad characterization, is that while especially large pharmaceutical companies have very developed marketing sciences groups, there's a tremendous opportunity for a partnership with those -- with small and big pharmaceutical companies to understand digital data and what the marketing mix is but also to blend it with other available data sources. When I think of WebMD, our strength in the large number of consumers, patients and health care providers who use our network, we have an incredible insight into what they're thinking, what they're doing and those markets. I think our analytics capability will be an enhancement to what we've previously provided and turn into a strategic long-term value for both the clients and for the company.

Operator

Thank you. That concludes the Q&A session. As a reminder, if necessary, there is a replay available of this call, which can be accessed toll free at (855) 859-2056, or if you are calling from outside the U.S., at (404) 537-3406. The passcode is 91819936. There's also a webcast replay available on www.webmd.com (sic) [www.wbmd.com]. Thank you for joining us today. You may now disconnect.

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