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WebMD Health (NASDAQ:WBMD)

Q4 2013 Earnings Call

February 20, 2014 4:45 pm ET

Executives

Risa Fisher

David J. Schlanger - Chief Executive Officer

Peter Anevski - Chief Financial Officer and Executive Vice President

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

Analysts

Steve Rubis - Stifel, Nicolaus & Company, Incorporated, Research Division

Jordan Monahan - Morgan Stanley, Research Division

Steve Cho - Wells Fargo Securities, LLC, Research Division

Gerard Heymann

David K. Francis - RBC Capital Markets, LLC, Research Division

Operator

Good afternoon, and welcome to WebMD Health Corp.'s Fourth Quarter 2013 Conference Call. Today's call is being recorded. I will now turn the call over to Risa Fisher, Vice President of Investor Relation.

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. Further information regarding WebMD, including information concerning risks and uncertainties, can be found in WebMD's SEC filings and information on this conference call is intended to be presented in conjunction with information contained in such filings.

Joining us on today's call are Marty Wygod, Chairman of WebMD; David Schlanger, Chief Executive Officer; and Peter Anevski, Chief Financial Officer. At the conclusion of our prepared remarks, we will open the call and take questions.

I'd like to turn it over to David Schlanger, CEO of WebMD.

David J. Schlanger

Thanks, Risa. Good afternoon. Thank you for joining us today. Our positive fourth quarter and full year 2013 results were driven by our advertising and sponsorship business, which benefited from an improved macro industry environment and our focused efforts to become a more customer-centric and efficient organization. After declines in 2012, we finished 2013 with 10% revenue growth and 68% growth in adjusted EBITDA.

The power and trust in our brand and the high quality of our content continues to drive growth in our audience. During the fourth quarter, WebMD reached a record 156 million average monthly unique visitors and generated an aggregate of 3.17 billion page views, representing increases of 33% and 23%, respectively, over the prior-year period. To put the scale of our multiscreen platform into perspective, according to recent comScore rankings, the WebMD Health Network ranked #1 in the health information category for U.S. PC reach, #1 among mobile health destinations, #1 in 49 of the 50 largest condition-suffering populations online and #27 of the top 100 U.S. web properties across all categories and verticals.

Our traffic growth is being driven by a range of factors, most notably the rapid adoption of mobile devices as an Internet access point, which has contributed to increases in the utilization of our mobile offerings.

During the fourth quarter, approximately 33% of our page view traffic was from a U.S. PC, 31% was from a U.S. smartphone, 8% was from a U.S. tablet device and 28% was international. While our traffic growth is being driven primarily by increased utilization of our mobile offerings, there is one important trend that should be highlighted; our mobile growth has not been at the expense of our desktop traffic.

First, with respect to page views, our U.S. PC page views in the fourth quarter were approximately equal to the prior-year period. This is in contrast to the declines we saw in the first 3 quarters of 2013. In addition, because tablets provide a similar user experience to the PC and we are able to monetize tablet traffic in a similar manner, we believe combining tablet and PC pages together is an important metric. This measure, which also showed declines earlier in 2013, now has improved to show page view growth of 6% in the fourth quarter.

Second, with respect to our unique visitors, when compared to many web publishers, WebMD is unique because we have not seen a migration of our audience away from our PC-based offerings in favor of mobile. Over the last several quarters, unique visitors to our U.S. PC-based offerings have continued to grow. This is evidence that when engaging with health and wellness content and tools on WebMD, users continue to rely on the larger screen size of a PC for many of their activities.

Our growth in PC users also stands in stark contrast to the rest of the health information category, where comScore reports that the next 5 most visited health information sites, as well as the health information category overall, saw declines in PC visitors in the fourth quarter. Unlike many of our competitors, we do not rely on third-party network affiliates or purchasing traffic to drive our audience. We own and publish all the sites in the WebMD Network and we believe our commitment to producing the most credible and trusted content is a primary reason our PC traffic has been increasing, while many of our competitors are in decline.

Through Medscape, we are also the leading online destination for health care professionals. During the quarter, Medscape averaged approximately 5.7 million physician sessions per month, an increase of approximately 5% over the prior-year period. To put Medscape's scale into perspective, on an annual basis, 625,000 registered U.S. physicians are active on Medscape, a substantial majority of the actively practicing physicians in the U.S. Additionally, we have approximately 1.2 million physicians active on Medscape from outside the U.S.

Turning to our revenue growth in the fourth quarter, our revenue was -- our growth was primarily driven by increased adoption of our advertising and sponsorship offerings by biopharma and consumer products companies. Also, as a result of the macro trends in health care, we recently began to develop new categories of marketing partners and advertisers and attract them onto our platform, including state and federal health exchanges, commercial health insurers and hospital and provider systems.

In our private portal business, during the quarter, we continued to work toward the January 1 launch of our largest customer, the Blue Cross/Blue Shield Federal Employee program. With this program, over 5 million FEP members now have access to a broad range of our cloud-based population health management solutions. Our services help users make more informed health and benefit decisions, positively change health behaviors, manage health and lifestyle conditions and lead healthier lives.

Last week, in conjunction with the release of our preliminary results, we provided our initial outlook for 2014. In our private portal services revenue, we expect to see substantial growth, which includes the launch of the FEP contract I just mentioned.

In our public portals, advertising and sponsorship revenue growth in 2014 will come primarily from continuing to penetrate biopharma and consumer product companies' marketing budgets, as well as attracting the new types of customers I previously mentioned. In addition, while we are still in the early days of mobile monetization, we are seeing increased demand for access to our mobile audiences and believe we are well-positioned with robust and flexible, multiscreen product offering and a strong competitive position needed to leverage this incremental opportunity.

Our 2014 guidance provided an expected range of revenue growth of between 6% and 12%. I'd like to take this opportunity to provide some context to that range of potential revenue growth.

As I commented last week, over the early weeks of 2014, our sales activity does not reflect year-on-year growth, which is in contrast to the sales momentum we experienced in the fourth quarter of 2013. We are not able to identify any structural issues in our market that would be responsible for slowing sales activity. Our products, pricing and competitive positioning are consistent with the recently completed and strong fourth quarter. One factor that needs to be considered is that our sales activity during the course of any year can be somewhat uneven, particularly if you look at a short period of time. In addition, we believe that timing, with respect to certain customer commitments, may be a factor in the recent sales trend.

While we don't believe that what we have seen in the first weeks of the year is necessarily indicative of a long-term trend, the recent sales trend is reflected in the range of guidance that we have provided.

Turning to our investments in areas of focus in 2014. Given our position at the intersection of the largest, most engaged audiences of consumers and health care professionals, we're continuing to invest in 2014 to position WebMD as the central place that consumers both manage all of their health information and relationships, share their data and communicate with their various health care providers.

Our goal is to establish WebMD as the place where consumers store, access and manage their health information in a trusted environment. To that end, in April, we expect to launch a new version of our flagship WebMD mobile app for iPhone that aggregates multiple sets of biometric data from devices such as glucometers, wireless scales and wearable devices, and wraps that data within a holistic health improvement program. Currently, there's a lot of interest around wearable devices in the quantified self movement. What's most important is using this data to change behavior and enable healthy outcomes, which is what our new offering is intended to do. For example, our new app will enable type 2 diabetics and those seeking to manage their weight to create and sustain new daily habits, better manage their condition and, ultimately, lead a healthier lifestyle. We'll do this by using device data to tailor content, provide personalized insights and to set and measure progress against goals.

With respect to connectivity, we are also building the foundation to connect our audiences of consumers and physicians. As we discussed during our last earnings call this past October, we acquired an innovative start-up technology called Avado to accelerate our connectivity efforts. We are making meaningful progress in integrating key aspect -- key aspects of Avado's technology into our platform. Its cloud-based, patient relationship management platform will serve as a key building block for a full suite of services connecting patients to their physicians and other health care providers.

As physicians take on financial risk and patients take on greater financial responsibility for their care, these tools will play an essential role in creating quality clinical outcomes that reduce cost. We expect to continue to increase our investments to realize these opportunities throughout 2014.

In summary, we have made substantial progress in becoming a more customer-centric and efficient organization, which resulted in strong revenue and earnings growth in 2013. While we continue to expand our offerings, we believe we are currently in the market with the right set of products and expect to see continued growth in our core advertising and sponsorship business as we look at the year ahead, including with new types of advertisers as we capitalize on opportunities created by macro changes affecting the health care industry.

We have seen early success in monetizing our substantial mobile audience, starting with initial sales and positive customer feedback for our native advertising brand alert product on Medscape. We are in the early innings of mobile monetization and expect to see increasing demand for our mobile audiences and our multiscreen offerings. And most importantly, we are investing to leverage our market-leading brands and audiences, including Medscape's international reach, into diversified revenue streams and additional long-term growth opportunities.

I'd like to turn the call over to Pete at this time.

Peter Anevski

Thanks, David. The results we announced today are consistent with the preliminary results we announced at the beginning of last week. Fourth quarter revenue was $146.3 million compared to $132.7 million last year, an increase of 10%. Public portal advertising and sponsorship revenue was $124.4 million compared to $112.3 million in the prior year. Private portal services revenue was $21.9 million compared to $20.5 million the prior year.

Fourth quarter adjusted EBITDA increased 35% to $40.6 million, or 28% of revenue, compared to $30 million or 23% of revenue in the prior-year period. The increased margin is attributable to higher revenues as well as lower expenses, resulting from savings achieved through our December 2012 workforce and other cost reductions.

During the quarter, we recorded an after-tax loss on convertible notes of $1 million, related to the purchase of $47.8 million principal amount of our 2.25% convertible notes due 2016.

Fourth quarter net income was $10.8 million or $0.25 per diluted share, compared to net loss of $6.1 million or $0.12 per diluted share in the prior-year period. In the current period, net income would've been $11.8 million or $0.27 per diluted share, without the effect of the after-tax loss and convertible notes. In the prior period, net loss would've been net income of $4.1 million or $0.08 per diluted share, without the effect of an after-tax discretionary [ph] expense of $5.5 million and noncash income tax valuation allowance of $4.7 million.

Operating cash flow was approximately $24.2 million for the fourth quarter. As we have stated in the past, quarterly operating cash flows can be impacted by the timing of compensation accruals and other accruals in relation to quarter's end, the timing of interest payments on our convertible notes, and the billing and collection of receivables from our customers. Operating cash flow was approximately $86 million for the full year.

Capital expenditures were $12.4 million in the quarter and approximately $22 million for the full year. During the quarter, WebMD received net proceeds of $291.8 million in cash upon issuance of $300 million aggregate principal amount of 1.5% convertible notes due 2020.

In addition, WebMD utilized $211.3 million in cash to repurchase approximately 6.5 million shares of its common stock and, as I just mentioned, $48.6 million in cash to repurchase $47.8 million of principal amount of its 2 1/4% convertible notes due 2016.

As of December 31, 2013, WebMD had approximately $825 million in cash and cash equivalents and $952.2 million in aggregate principal amount convertible notes outstanding.

On February 10, 2014, our Board of Directors increased by $50 million, the amount available under our existing stock repurchase program, bringing the total amount currently available for repurchases to approximately $70 million.

Turning now to our financial guidance for 2014. The guidance we issued today is consistent with the preliminary outlook we provided on February 10. Please note that there is a schedule summarizing our guidance included in today's press release.

Our guidance reflects continued growth in the year ahead. For the first quarter of 2014, we expect revenue to be approximately $130 million to $133 million, an increase of approximately 15% to 18% from the prior-year period. This strong first quarter revenue growth reflects the strength in advertising and sponsorship sales activity that we experienced in the latter half of 2013, as well as the launch of the FEP contract in our WebMD Health Services business.

Adjusted EBITDA in the first quarter is expected to be approximately $28.5 million to $30.5 million, an increase of approximately 34% to 43% from the prior-year period. Net income as a percentage of revenue in the first quarter is expected to be approximately 3% to 4%. For the full year 2014, we expect revenue to be approximately $545 million to $575 million, an increase of approximately 6% to 12% from 2013. Our mix of revenue is expected to be as follows: Public portal advertising and sponsorship revenue is expected to be approximately $450 million to $475 million, and private portal services revenue is expected to be approximately $95 million to $100 million.

As David mentioned, the early weeks of sales activity in 2014 does not reflect year-on-year growth. And while we do not believe it is necessarily indicative of a continuing trend, it is considered in the range of revenue guidance we are providing. If this sales trend were to continue, it would impact the rate of growth in the latter half of 2014.

The strength in the first quarter of 2014 reflects a strong sales and maximum [ph] experience in the latter half of 2013. We expect adjusted EBITDA in 2014 to be approximately $140 million to $155 million, an increase of 14% to 26% from 2013. Adjusted EBITDA, as a percentage of revenue, is expected to be approximately 26% to 27%, an increase of approximately 200 to 300 basis points over 2013. We expect net income in 2014 to be approximately $27 million to $39 million, or $0.63 to $0.84 per diluted share, compared to $15.1 million or 31% -- $0.31 per diluted share in 2013. Depending on our quarterly and annual net income, some or all of our outstanding convertible notes may become dilutive. We have attached a schedule to the press release we issued today which provides the calculations under which the convertible notes would become dilutive.

For the year 2014, diluted share counts will range from approximately 48.7 million to 50.7 million shares, which include 5.7 million shares related to our 1 1/2% convertible notes. We expect capital expenditures for 2014 to be approximately 25 million to 30 million.

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 unusable items.

Before we open up the call for your questions, I'd like to turn it -- the call over to Marty Wygod, Chairman of WebMD.

Martin J. Wygod

Thanks, Pete. As our results show, we have made significant progress in 2013. By focusing on our customer needs and enhancing our users' experience, our financial performance reflects strong year-over-year growth. Equally important, our scale and engagement with consumers and health care professionals continues to be preeminent.

As we are all witnessing, our health care system is going through unprecedented changes. We believe these changes are creating substantial opportunities for WebMD. We are well-positioned to develop innovative products and services, which will offer our users the tools and information they need to better manage their health and health care dollars. We are working internally to accomplish these objectives, as well as seeking to forge key strategic partnerships and acquire the right technologies and talent.

While we work to capitalize on these emerging opportunities, we are concentrating on continuing to evolve our core businesses and build upon the improvements made this past year.

On behalf of our Board, I want to thank all of our employees for their efforts in achieving our 2013 results and, of course, our shareholders for their continued support.

Operator, at this time, we'd like to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today comes from the line of Steve Rubis of Stifel.

Steve Rubis - Stifel, Nicolaus & Company, Incorporated, Research Division

It's great to see that you guys are making strong momentum in terms of the private portals and developing some of the ancillary businesses. Can you help me understand in terms of the FEP contract and the strength that you're showing on the private portal side, is there an opportunity for you guys to be taking share from competitors? We know that some companies who are considered competitors in that business have stated on recent calls that up to 20% of their revenue dollars are up for renewal. Is that an opportunity for you guys?

David J. Schlanger

Steve, this is David. The market for wellness programs, whether they're purchased through commercial health plans or employers in the FEP -- FEP is kind of a combination of both, is pretty fragmented, and there's a lot of players out there. So yes, we think there's a lot of opportunity for us to grow that business, and the FEP contract is a great reference account for us to go to other governmental agencies, whether they be at the federal government or the state level.

Steve Rubis - Stifel, Nicolaus & Company, Incorporated, Research Division

Got it. And then one more question, I'll just get in the queue. In terms -- recently, when you were on the road, you told us that the backlog was better and stronger this year than compared to last, but when I look at the deferred revenue line, it seems like it's declined for the first time since the third quarter of '12 on a year-over-year basis. And I know in the past, you kind of downplayed the analysis. But when the number goes negative, it seems to correlate with some weakness. So if there's any sort of candor you can provide around this that can allay, concerns or fears that investors might have that this is indicating this trend that you say is more not a trend currently, but this deferred revenue growth kind of suggests that it could be a trend? Anything you can provide us would be great.

Peter Anevski

Yes. So this is Pete. The level of our deferred revenue, if you look at it, is small relative to our revenue guidance, even for Q1. The majority of our deferred revenue generally turns within the next quarter. So the only thing I could point to you, obviously, is the guidance that we just put out for Q1, that shows good growth over last year to help allay that concern. But it is not an indicator for us. It's not what we look at. There's a whole host of other things that we look at related to our business as it relates to looking out into the out quarters.

Operator

Our next question comes from the line of Jordan Monahan of Morgan Stanley.

Jordan Monahan - Morgan Stanley, Research Division

I guess, just 2 quick ones, if I may. The first is -- I'm just wondering, you've talked a couple of times now about the sales trends in the first quarter being -- not indicating growth, and so, I guess, being slightly weaker than you otherwise would prefer. I'm just wondering, do you have any more color on what exactly is happening there? And are those short-term bottlenecks? Or is that indicative of something longer term? And then just a second question on metrics. What do you think are the best metrics that investors can use to judge the health of the business? Should they look at effective CPM or engagement, or are there other metrics that you suggest?

David J. Schlanger

Just with respect to your first question, we've provided some commentary around what's happened -- what's been happening over the first weeks of the year. And I think the key takeaway there is that we're not seeing anything structural in the marketplace with -- and really, no -- kind of no macro changes from the fourth quarter, which was a strong quarter. You need to understand that it's a short window of time and our sales are not even throughout the course of the year. So that has caused us to say that we don't believe it's necessarily indicative of a longer-term trend. But in the range of guidance that we put out, we have taken into account at the lower end of the guidance, the sales trend that we have seen year-to-date in 2014.

Martin J. Wygod

In addition to that, in the fourth quarter of this -- of last year that -- the sales were extremely strong, and we think it's very possible that some of the business that would have naturally fallen into the first quarter, from a sales point of view, came in to the fourth quarter. We also experienced 6 or 7 delays in meetings that we had scheduled with major accounts because of the weather where we either could not get to the respective client or they could not get to the meeting. So you put those 2 variables together there, and that fully answers the weakness that we're seeing in the first quarter. So we're building it into our guidance, but we don't think it's representative, necessarily, of the growth for the year.

Jordan Monahan - Morgan Stanley, Research Division

Okay, great. And yes, sorry -- just wondering if you had any thoughts on the best metrics that we should be looking at?

David J. Schlanger

Well, I think the metrics you should be looking at are the ones that we talk about. The growth in our audiences, and clearly, the revenues we're generating and the trends they're showing on a kind of a year-over-year basis. They're -- you can't do the math and kind of look at our revenues and our page views and try to come up with an effective CPM. Our business is a bit more complex and nuanced than that, particularly because of the presence of the Medscape site which, relative to the consumer site, has a small audience because it's a physician audience, but is a high level of interest to industry. So I would just caution you not to try to do the math and come up with an RPM for our pages or some type of effective CPM.

Martin J. Wygod

[indiscernible] as responsive to those possible to The Street, and there's opportunities for substantial marketing joint ventures or advertising opportunities because you do have so many major companies at this time that are going into total health care population management that are meeting with us and wanting to incorporate and partner with us in some way, the reach that we have on the consumer side and the patient side -- on the consumer side, the patient side, as well as the physician side. So there's so many large opportunities out there in the provider space as well where they, for the first time, have to deal with consumer-facing. The important factors that will drive the growth over the next few years are present now in the health care environment. But the key is for us to take the appropriate advantage of them, pick the right partners and go forward here, and you'll see the continued growth that we've demonstrated in the past.

Operator

Our next question comes from the line of Peter Stabler.

Steve Cho - Wells Fargo Securities, LLC, Research Division

This is Steve filling in for Peter. Staying on Medscape, I wanted to ask you a question about the opportunity there internationally. I think you guys recently commented that you rolled out in-country versions of Medscape for Germany and France recently. I was just hoping you could provide some more color on the roll-out there as to when it occurred and maybe what's in the pipeline for 2014. And secondly, if there's any reason we should expect pricing on the international product to be different than the U.S.

David J. Schlanger

Well, so first, just with respect to the general Medscape international opportunity, the pharmaceutical industry does both have -- you have robust budgets to educate physicians and promote their products to physicians throughout the world. We have, as we said in the prepared remarks, 1.2 million active physicians outside the U.S. And over the last 2 years or so, we've had a dedicated sales force based in Europe to work with our pharmaceutical clients to actually monetize that outside-the-U.S. audience, and they are having some great success. We launched -- I believe, it was in -- I don't know if it was 20 -- late in 2012 or early 2013, in-language versions of Medscape in France and Germany because of some unique opportunities we saw there. There aren't any other current plans to launch other in-country versions at this time. It doesn't mean we won't do it in the future. And we're continuing to invest in actually building the Medscape -- the international Medscape audience to medscape.com.

Peter Anevski

Regarding your pricing question, we generally price the same internationally for the same products as we do in the U.S.

Operator

Our next question comes from the line of Gerard Heymann of JPMorgan.

Gerard Heymann

I have 2 quick questions. The first one, can you update us on what the current NOL is on the balance sheet?

Peter Anevski

It's approximately 700 -- $700 million.

Gerard Heymann

Okay, great. And the second one is on January 15 of this year, Tom Coleman from Kensico Capital resigned from the Board. Was this done to facilitate the potential sale of their position? And if so, would you consider buying those shares?

Martin J. Wygod

Okay. This is Marty trying to respond to that. We don't -- we don't really have a definitive idea of exactly what Kensico is going to do here with their position. Over the last 4 years, they've substantially, at different times, increased or decreased their position, but they've always come back as a major holder. He -- I wouldn't be surprised to see them lightening up to some degree at this point, but I have no -- nothing to base it on. As well as the fact the stock has appreciated substantially recently, so I wouldn't be surprised if you saw 1 to 2 insiders selling. That would not include me. But just because of the appreciation and the security, that no former matter takes away from the confidence that the senior management has here in relation to the continued long-term growth of this company. But I think any additional questions on Kensico, you might as well direct it directly to them. They'd have a better idea of what their current intentions are.

Gerard Heymann

Great. Would you consider buying those shares if they were offered?

Martin J. Wygod

At this point, we'd rather not get below the 40 million shares outstanding. We'd like to keep it at 40 million, so with some of our institutional holders. We had reduced it from 59 million to 40 million with buybacks of close to 18 million, 19 million shares at an average price of $29.30 we primarily raised this money for certain substantial acquisitions that we have not been in a position to make as of this point, but we're still optimistic that we will make them. So at this point, we have no intentions of buying any blocks.

Operator

Our next question comes from the line of David Francis of RBC Capital Markets.

David K. Francis - RBC Capital Markets, LLC, Research Division

David and Marty, you guys talked about some of the changes going on broad basis in the health care market and how that's causing both payors and providers to engage with consumers at a different level. And I was wondering if you could talk in a little bit more detail about some of the conversations that you've been having with either of those groups and how that plays into your long-term plans, either from an investment perspective or an M&A perspective, to tap into some of those other potential revenue opportunities?

David J. Schlanger

Well, certainly the near-term opportunities that -- and to be really been accelerated by the Affordable Care Act is that health insurers now have to become consumer marketers for the first time. So they never really sold, in any meaningful way, directly to consumers before. But now, they're in a very competitive environment for all the millions of people that are shopping for insurance through the exchanges and will be during each annual enrollment period. So, that's created a whole new category of advertisers -- of advertiser for us. At the same time, providers are consolidating, hospitals are buying practices. They're in a very competitive market. They also have to now compete for patient volume, particularly around the areas of excellence that they're creating. So large provider systems are also becoming the marketers for the first time. So again, kind of driven by some macro changes taking place in the health care industry, we've been fortunate enough that new categories of advertisers have emerged. Longer term, particularly with respect to providers, as they begin to assume financial risk over the quality of care and the outcomes they generate, they're going to need a whole new set of tools to help them manage patient care, and those are the tools we're investing in and building around the recent Avado acquisition. And some of those opportunities to diversify revenue streams, we certainly see can be accelerated through external transactions and acquisitions. So again, the macro trends in health care are creating both near-term opportunities from an advertising perspective, but longer-term opportunity beyond advertising to really diversify our revenue streams and get more involved in actually how care is delivered.

David K. Francis - RBC Capital Markets, LLC, Research Division

So as you look at the Avado transaction as potentially, not necessarily a model, but an example of things that you guys might be doing, is that another area that we might be looking for you guys to deploy some of the capital on the balance sheet?

David J. Schlanger

Yes, certainly, we think that our ability to take full advantage of some these opportunities to diversify our revenue streams can be enhanced through external transactions. So you can certainly look for us to try to be more active from an M&A perspective.

Martin J. Wygod

There are a lot of companies out there today that are in a earlier stage of development than we are in some ways. And most of their business models lack one thing; the ability to attract either the patients or the physicians, or have the necessary brand to get the necessary momentum they need. So there's a lot of opportunity for us to make the right partnerships out there or make the right combinations.

Operator

[Operator Instructions] And we have a follow-up question from the line of Steve Rubis of Stifel.

Steve Rubis - Stifel, Nicolaus & Company, Incorporated, Research Division

Guys, I couldn't help myself. But again, great momentum, and the question I have here is around the relaunch of the flagship app that you talked about in April. How are you guys looking at monetizing that? Is that going to come primarily through advertising? Or is it going to really kind of strengthen the private portal's business in kind of making your population health management offering all that more robust?

David J. Schlanger

So initially, Steve, the new version of our flagship app that we're launching in April will be to create a more personalized, engaging consumer experience to provide a whole level of capability that never really existed before, and it's really the beginning of WebMD becoming the place -- the central place where people manage all of their health care information, all their health relationships. So initially, again, it's very much about consumer engagement and creating new consumer behaviors. The relaunch of the WebMD flagship app is also an initial step, like Avado is, towards creating a whole notion of patient and physician connectivity, where the patients aren't just managing their health -- their personal health care data in a central place, but sharing it with their physicians in a more active way to manage health. And we see, long term, that, that opens up more transactionally-oriented revenue streams beyond -- in comparison to our traditional advertising model. And in certain circumstances, those transactional-type revenues will be paid for by consumers. In other cases, they'll be paid for by providers, but that's more of a longer-term opportunity for us.

Steve Rubis - Stifel, Nicolaus & Company, Incorporated, Research Division

Got it. Got it. That's great. And then in terms of -- one of the large verticals that you kind of added to the platform is really around health insurance and managed care organizations. And you've talked about this at the conferences recently about kind of -- and even today, being the center of brand-building for these companies. Are you going to be able to monetize those agreements differently than you currently do? So when you think about your typical advertising, it's -- people will do a proxy CPM, but it's obviously components of slide shows and other types of things. Is there a way to increase monetization that maybe it's a per person lead or something along those lines that could allow the MCL [ph] vertical to be even more powerful than some of the advertising you have now?

David J. Schlanger

Well, I think all I'll comment on, Steve, is that the large health insurers have created substantial budgets to market their services to consumers. We offer a whole host of advertising and sponsorship products that they can leverage similar to other advertisers on our site. And those advertising sponsorship products are priced in various ways, so they're not all CPM pricing. And again, the health insurers and others that have a stake in driving people to exchanges and trying to reach out to those people that are going to be purchasing insurance can take advantage of those various products and those various pricing models we offer.

Steve Rubis - Stifel, Nicolaus & Company, Incorporated, Research Division

Got it. And then the last one is kind of a follow-up to the sales questions I asked earlier. One of the issues I wrote about after your presentation at our conference was the Bausch + Lomb contract. And as I talked to clients, people pointed me to the Valiant CEO's presentation at a recent conference where he said that he really didn't care about Internet advertising. Now personally, from my review of the industry and competitors and talking to you all, that doesn't seem to be the norm. So my question is, would you say that the Valiant CEO is kind of an outlier? And then secondly, are there any key sponsors that you think are at risk of falling off the platform? I mean, based on what I hear, there isn't, but anything you could give us would be great.

David J. Schlanger

I mean, we don't comment on any specific customer, Steve. And I think -- if you -- we do business with hundreds of brands, so I think that my opinion, the Valiant CEO who doesn't believe in marketing his products to consumers is an outlier. If you just look at the range and the breadth and depth of our advertising partners, I think you can see that pharmaceutical industry certainly is committed to marketing its products to both health care professionals and consumers.

Operator

Thank you, and we have no additional questions in queue. As a reminder, if necessary, there is a replay of this call which can be accessed toll free (855)859-2056, or if you are calling from outside the U.S. at (404) 537-3406. The passcode is 35395104. There's also a webcast replay available on www.wbmd.com. Thank you for joining us today.

David J. Schlanger

Thanks, operator.

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