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Executives

Risa Fisher - VP of IR

Kevin Cameron - CEO

Marty Wygod - Chairman of HLTH and WebMD

Wayne Gattinella -CEO and President of WebMD

Mark Funston - CFO of HLTH and WebMD

Tony Vuolo - COO of WebMD

Analysts

Heath Terry - Credit Suisse

Jen Watson - Goldman Sachs

Sandy Draper - Raymond James

Rob Kelly - Smith Barney

Jeremy Lopez - William Blair

Mark Mahaney - Citi Investment Research

Brian Pitz - Banc of America

John Kelly - Citigroup

James Kumpel - Friedman, Billings,Ramsey

Anthony Petrone - Maxim Group

Denise Kong - DeepHaven Capital

Neil Doshi - ThinkEquity Partners

Geoff Dancey - Cutler Capital Management

Clark Wong - Needham& Company

Alex Lach - CamdenAsset Management

HLTH Corp. (HLTH) Q3 2007 Earnings Call November 7, 2007 4:45 PM ET

Operator

Good afternoon and welcome to the HLTH Corporation and WebMDHealth Corp. September 2007 Quarterly Conference Call. Today's conference isbeing recorded.

And now at this time, I would like to turn the call to Ms.Risa Fisher, Vice President of Investor Relations. Please go ahead.

Risa Fisher

Good afternoon. This is a joint conference to discuss HLTHand WebMD's third quarter financial results. I will read the followingstatements concerning forward-looking disclosures.

All statements made today, other than statements ofhistorical fact, are forward-looking statements, including those regarding: ourguidance on future financial results and other projections or measures of HLTHand WebMD's future performance; our expectations concerning the growth ofonline marketing budgets; other market opportunities and our ability tocapitalize on them; the benefits expected from acquisitions and othertransactions, from new products and services and from other potential sourcesof additional revenue; and the planning for a potential transaction that couldallow HLTH Corporation's stockholders to have a more direct investment in WebMD.

These statements speak only as of today and are based on ourcurrent plans and expectations, and they involve risks and uncertainties thatcould cause actual future events or results to be different from thosedescribed, including the risks and uncertainties that are described in HLTH andWebMD's SEC filings.

Except as required by law, HLTH and WebMD do not undertakeany obligation to update our forward-looking statements to reflect futureeffects or circumstances. The earnings release issued today by HLTH isavailable at www.hlth.com in the investor relations section and has also beenincluded in a Form 8-K filed today with the SEC.

The earnings release issued today by WebMD is available atwww.wbmd.com in the investor relations section and has also been included in aForm 8-K filed today with the SEC. The respective Form 8-Ks and other SECfilings are also available on HLTH's and WebMD's respective websites and on theSEC's website.

The releases and Form 8-K that were filed today includereconciliation's between GAAP and non-GAAP financial measures to be presentedin this call.

I'd now like to turn the call over to Kevin Cameron, CEO ofHLTH Corporation.

Kevin Cameron

Thanks, Risa. Good afternoon and thank you for joining ustoday. Joining me today on the call are Marty Wygod, Chairman of HLTH andWebMD, Wayne Gattinella, CEO and President of WebMD, Mark Funston, CFO of HLTHand WebMD, and Tony Vuolo, COO of WebMD. I'm going to turn the call over toMarty right now to give you an update on some comments that we made at ourannual meeting.

Marty Wygod

Thanks, Kevin. At the HLTH's annual meeting of stockholdersin September, I indicated that HLTH was working on a plan that would meet thedesire expressed by HLTH holders to participate more directly in the ownershipof HLTH's 84% owned subsidiary WebMD. Although, HLTH does not have a totallydefinitive proposal at this time, we want to share with you a brief outline ofa possible transaction that HLTH is contemplating.

The potential transaction is expected to involve thefollowing: HLTH would merge into WebMD and WebMD would be the survivingcorporation. HLTH shareholders would receive as merger consideration acombination of cash and WebMD shares for their HLTH shares.

This would allow HLTH shareholders to own WebMD sharesdirectly. We would expect that WebMD shares would constitute up to 50% of themerger consideration and their receipt would be tax free to HLTH shareholders.

For a WebMD shareholder, their shares would be unchanged,however the transaction would simplify the WebMD capital structure byeliminating the class B shares currently held by HLTH and HLTH's control ofWebMD.

In addition, as a result of the transaction, the WebMD floatwould be dramatically increased and we expect to reduce the total number ofshares outstanding of WebMD common stock in the transaction.

HLTH has received unsolicited preliminary indications ofinterest from various companies expressing their interest in acquiring ourPorex and ViPS subsidiaries, as well as our 48% ownership interest in EmdeonBusiness Services.

Accordingly, if we proceed, we would expect that the cashportion of the merger consideration would come from a combination of cash onhand at HLTH and/or WebMD and the anticipated proceeds from the potential saleof these assets.

We expect the merger consideration to reflect, among otherfactors, an evaluation of the realizable values of the assets and liabilitiesof HLTH other than its ownership of WebMD.

As you would expect, after a transaction such as this,excess corporate overhead would be eliminated so that the amount necessary tooperate the ongoing business would be retained.

We have taken preliminary steps to provide the Board ofDirectors of both WebMD and HLTH the necessary resources to review the proposedrestructuring. In that regard, WebMD's Board of Directors has established aspecial committee of independent directors consisting of Stanley Trotman andJerry Keller and the special committee has retained independent legal counseland financial advisors.

As to timing, HLTH has not yet submitted a proposal to theWebMD special committee for its consideration. We expect HLTH to do soimmediately. That will begin a process of HLTH negotiating with a specialcommittee regarding transaction terms that the negotiations result thatdefinitive agreement we expect that HLTH and WebMD would hold special meetingsof stockholders to seek approval of the transaction.

At this stage, we cannot be sure whether the process willlead to a completed transaction and if it does what the ultimate terms andtiming will be.

I would like to turn it over to Mark Funston and then WayneGattinella to review the third quarter results and financial guidance for WebMDand HLTH and then we will take questions at the end of the presentations. Mark?

Mark Funston

Thank you, Marty. First: I will address WebMD's financialresults. Please note that WebMD's prior period results reflect the impact ofthe change in the prior year's income tax provision related to the accountingtreatment of tax-deductible goodwill amortization, which we discussed on priorconference calls this year.

This change resulted in an increase in non-cash deferredincome tax expense in prior periods. WebMD filed amended Forms 10-Q and 10-K onMay 10, 2007, which contained those revised prior period results.

WebMD revenues, for the September 2007 quarter, were $87.2million, compared to $66.6 million last year, an increase of 31%. Revenuegrowth was 25% over the prior year, when excluding acquisition related revenuesof $7.1 million for the September 2007 quarter and $740,000 in September 2006,$400,000 in off-line CME revenue in the September 2006 quarter and the impactof the AOL expiration on April 30, 2007, which contributed $1.4 million in the September 2006 quarter.

Adjusted EBITDA for the September 2007 quarter was $24.1million, compared to $14.6 million last year, an increase of 65%. AdjustedEBITDA as a percent of revenue improved 560 basis points to 27.6% from 22% lastyear. Adjusted EBITDA per diluted share was $0.40 compared to $0.25 last year. Theadjusted EBITDA margin on incremental revenue was 46% for the September 2007quarter.

Excluding the impact of revenue and adjusted EBITDA fromacquisitions, the expired AOL arrangement and the discontinued off-line CMEproduct discussed earlier, the adjusted EBITDA margin on incremental revenueexceeded 50% for the September 2007 quarter.

On-line services segment adjusted EBITDA increased 72% to$21.9 million or 27.6% of segment revenue compared to $12.7 million or 21.6% ofsegment revenue last year. Publishing and other services adjusted EBITDA was$2.1 million compared to $1.9 million last year.

Net income for the quarter was $11.5 million or $0.19 pershare compared to $490,000 or $0.01 per share last year.

Looking further at the revenue increase of 31%, advertisingand sponsorship revenue increased 36% to $59.1 million resulting primarily frominternal growth. Acquisitions contributed a total of $4.1 million of revenue inthe September 2007 quarter at $700,000 in the September 2006 quarter. Excludingthese revenues, and the impact of the expired AOL agreement, advertising andsponsorship revenue increased 33% compared to last year.

Private portal licensing revenue increased 37% to $20million, resulting from internal growth and from our acquisition of Subimo,which contributed $3.1 million during this quarter and no revenue last year.After adjusting for these revenues, licensing revenue increased 16% compared tolast year. Publishing and other revenues was $7.6 million, a decline of $79,000compared to last year.

This decline includes the impact of our previously announceddecision to discontinue our off-line CME products. These products contributed$400,000 in revenue last year and no revenue this year.

Looking at certain expenses, depreciation and amortizationwas $7.1 million compared to $5.1 million last year. This increase was due to acombination of the impact of acquisitions and increased levels of capitalexpenditures.

Non-cash advertising expense was $169,000 this quarter,compared to $1.7 million last year as the timing of the utilization of ouravailable television advertising is more heavily weighted toward Q4 than inprior years. Non-cash stock compensation was $5.7 million compared to $7.2million last year.

Interest income totaled $3.5 million for the quarter, anincrease of $2.3 million from last year due to increased cash available forinvestment and higher interest rates. The provision for income taxes was $3.1million for the quarter compared to $1.4 million last year.

The income tax provisions for the September 2007 quarterincludes a non-cash expense of $1.4 million, related to the current periodimpact of the deferred tax liability for tax deductible goodwill. WebMD'sweighted average diluted share count for the quarter was 59.8 million.

Turning to our balance sheet, WebMD's cash and investmentbalance at September 30, 2007 was $278 million. Operating cash flow was $27.9million for the September 2007 quarter compared to $15.1 million last year. Aswe have stated…

Operator

Mr. Cameron, it appears we have lost that one speaker line.

Marty Wygod

I can hear you. This is Mr. Wygod.

Operator

Hi, Mr. Wygod, apparently we lost that one speaker line.Wonder if you could maybe continue the conference until we re-establish thatline?

Marty Wygod

That is difficult because all the parties are on that line.

Operator

Well, if we could get everyone to just please standbymomentarily while we reconnect that line. We've got that line reconnected.

Risa Fisher

Operator, can you hear us?

Operator

Yes, Ma'am. Please continue.

Risa Fisher

We are not sure where we got disconnected.

Marty Wygod

You got disconnected after you talked about the interestincome, $3.5 million for the quarter, et cetera. So just start at the provisionfor income taxes.

Mark Funston

Got it, okay. The provision for income taxes was $3.1million for the quarter compared to $1.4 million last year. The income taxprovision for the September 2007 quarter includes a non-cash expense of $1.4million related to the current period impact of the deferred tax liability fortax-deductible goodwill.

WebMD's weighted average diluted share count for the quarterwas 59.8 million.

Turning to our balance sheet. WebMD's cash and investmentsbalance at September 30, 2007 was $278 million. Operating cash flow was $27.9million for the September 2007 quarter compared to $15.1 million last year.

As we have stated on prior calls, quarterly operating cashflows can be impacted by the timing of the cut-off of compensation accruals,other expense accruals, the billing and collection of receivables andreimbursements to HLTH in relation to the quarter's end.

Additionally, during the quarter WebMD received $9.9 millionas a capital contribution from HLTH as the final true-up payment for HLTH'sutilization of a portion of WebMD's NOL during 2006. Capital expenditures were$3.8 million for the September 2007 quarter.

Turning to the financial guidance for the fourth quarter2007. WebMD's revenue guidance for the December 2007 quarter is $94 million to$98 million, an increase of 17% to 22% over the prior year.

As we indicated on the October 16th, fourth quarter revenueswould be impacted by the timing of the delivery of certain advertising programsbeing more weighted to 2008 than had been anticipated and the lengthening salesand implementation cycle in the private portal business.

Adjusted EBITDA guidance for the December 2007 quarter is$30 million to $32.5 million, an increase of 34% to 46%, reflecting the lowerrevenue guidance range offset by the expected higher margin on incremental revenuesdue to the acceleration of benefits from infrastructure investments andacquisition synergies.

Adjusted EBITDA as a percentage of revenues is expected tobe approximately 32% to 33% compared to 28% last year, an increase of 400 to500 basis points. Our guidance for net income is a range of $15 million to $18million for the December 2007 quarter compared to $6 million last year, anincrease of approximately 150% to 200%.

Turning to WebMD guidance for 2008, our guidance is stillpreliminary and is subject to further refinement as we conclude our planningprocess. Our preliminary outlook for 2008 is for revenues of $420 million to$435 million.

Our 2008 revenue guidance assumes the following revenuedistribution: Approximately 71% from advertising and sponsorships with organicrevenue growth of approximately 35% over 2007; approximately 22% from licensingof our private portal products with organic revenue growth of approximately 20%over 2007; and approximately 7% from publishing and content syndicationrevenues, an increase of approximately 5% over 2007.

We believe adjusted EBITDA would be $120 million to $130million, an increase of 47% to 54% compared to 2007. Adjusted EBITDA as apercentage of revenue is expected to be approximately 30% in 2008, an increaseof about 500 basis points compared to 2007. Adjusted EBITDA per share isexpected to be $1.94 to $2.10 per share for 2008.

The adjusted EBITDA margin on incremental revenues for 2008is estimated to approach 50% after adjusting for the revenue in earnings of theexpired AOL arrangement during 2007. Our expectations for adjusted EBITDAmargin on incremental revenues contemplate the impact of lower margins on bothour private portal and publishing products.

This is due to the revenue growth from those products comingprimarily from coaching and other off-line services. The margin on incrementalrevenues for advertising and sponsorship products, which comprise about 71% ofour revenues, is expected to be about 55%.

Net income for 2008 is expected to be $44 million to $53million, an increase of 34% to 49% over 2007. Our guidance for Q4 2007 and fullyear 2008 does not include any benefits stemming from the reversal of valuationallowance against our deferred tax assets.

Our expectations for net income for 2008 contemplate that wewill begin to record a non-cash federal income tax expense. As required underSFAS 109, we now have a sufficient earnings history to reduce the valuation onthat allowance against our deferred tax assets, primarily a tax NOL and tobegin recording a non-cash tax provision.

The increase in the effective tax rate to 41% from 20% in2007 is a result of this non-cash tax expense. Our guidance does not reflectthe potential transaction that may occur between WebMD and HLTH as discussedearlier. A schedule summarizing WebMD's updated financial guidance as well as thereconciliation between GAAP and non-GAAP financial measures is attached to thepress release WebMD issued today.

I would now like to turn it over to Wayne.

Wayne Gattinella

Hey thanks, Mark. Our third quarter growth was strong as wecontinue to consolidate our leadership as the most recognized and utilizedbrand of health information and better position the company for sustainablegrowth for the future.

Our advertising and sponsorship revenues during the quarterincreased 36% over a year ago, as we continue to significantly expand ourbusiness with biopharmaceutical and consumer products companies.

Traffic to the WebMD health network averaged 40.8 millionunique users per month and page use totaled 863 million pages during thequarter, increases of 26% and 18% respectively from a year ago. As wepreviously announced, our programming relationship with AOL ended on April30th. So excluding AOL health traffic from the prior year quarter, WebMD usersand page view traffic grew 35% and 23% respectively.

The WebMD network is comprised of the richest and mosttargeted set of health sites on the internet with 96% of our quarterly page usegenerated on WebMD owned and operated sites. Last month we announced new searchand advertising distribution agreements with Yahoo!, one of the most traffickedInternet destinations worldwide.

As part of our agreement, Yahoo! will power sponsored searchacross the WebMD network of consumer sites. In addition, the new agreementprovides WebMD with exclusive rights to sell Yahoo! network inventory in thehealth care market by enabling our advertisers to reach WebMD users whenthey're on Yahoo!

This new relationship will dramatically extend the targetedadvertising reach and inventory of WebMD, as well as provide the WebMD userwith more timely and relevant marketing messages on Yahoo!

Our on-line reach to physicians continues to expand, as wegenerated more than one million monthly physician visits to our professionalnetwork during the quarter. In the third quarter 730,000 continuing medicaleducation or CME programs were completed on our professional sites, an increaseof 50% over last year. Since January, more than 2.1 million CME programs havebeen completed on our network, already exceeding the total volume for CMEprograms for the entire 12-month period of 2006.

On-line advertising sales were very strong during thequarter, as we continue to penetrate the biopharmaceutical market with increasedlevels of sponsored programs aimed at both consumers and physicians.

We are seeing some of our biopharma customers enter the 2008ad market earlier than in previous years, with up front buying across some ofthe most valuable areas of our sites. Although the revenue contribution fromthese sales in the second half of 2007 is lower than we anticipated, we doenter 2008 with a strong backlog of sold advertising and sponsorship programs.

We continue to leverage the portal technology platform thatwe implemented for our consumer site earlier this year, by launching newservices that are designed to enhance the level of user engagements, providesincremental opportunities for monetization and increase the overall level ofsearch engine optimized traffic to our sites.

Our investments are beginning to pay off. We've securedseveral new sponsorships for our new WebMD health check products, a new onlinehealth assessment that helps people measure their health risks across a widespectrum of issues.

Drug insights our new community product that allowsconsumers to review and share their personal experiences with individualprescription products, has already captured many thousands of personal reviewsin just the initial launch stage.

And overall, our mix of consumer traffic generated bynon-paid search engine referrals has continued to steadily rise. In addition,we have several important new consumer products in development for launch inthe coming year.

On our physician network, we launched Medscape Alert, a newproduct that's designed to give biopharma clients a powerful way to quicklyreach targeted physicians with breaking clinical news and information ondemand. Our first sponsored Medscape Alert was already delivered just at theend the quarter.

In the third quarter we announced our plans to launchMedscape in Latin America, Spain, and Portugalthrough a new alliance with [MedCenter], the leading provider of onlinepharmaceutical marketing and continuing medical education in these markets.

We are leveraging MedCenter's established network ofphysician relationships with prominent medical societies to bring Medscape'stimely and relevant clinical information to these valuable new markets. We arealso continuing to evaluate alternatives for entering other internationalmarkets as well.

Turning to the private portals market, WebMD continues tolead the market in providing co-branded health and benefits portals to largeemployers and health plans. We've expanded our installed base of companieslicensing the WebMD private portal platform to now include GlaxoSmithKline,Blue Cross and Blue Shield of Louisiana, Providence Health Systems. We also implementedour health portal platform combined with WebMD health coaching for EatonCorporation, Notre Dame University,and Baylor Health Care System.

And in addition, we implemented new health care decisionsupport services this quarter for Wal-Mart and Blue Cross, Idaho.

During the quarter, we implemented our first WebMD healthalerts product for IBM employees. Health alerts integrates with the WebMDpersonal health record to securely message employees on potential gaps in theircare.

At the end of the third quarter, the installed base of largecompanies licensing the WebMD private portals platform totaled 112 organizationscompared to 91 a year ago. In addition, we have approximately 150 othercustomers who purchase our standalone health decision support services.

We continue to experience a longer sales and implementationcycle with the introduction of these new clinical and care management services.These services prompt a more sophisticated and somewhat longer buying decision.

In addition, we are beginning to see some increasedcompetition as our success has attracted the attention of the offline diseasemanagement companies and payors in this area. Because the majority of our newimplementations tend to occur in the back-half of the year, we don't expect tosee significant revenue contribution from new account activity until the latterpart of 2008.

Finally, I'm very pleased to announce that on the November,the 1st, William Pence joined WebMD as Executive Vice President and ChiefTechnology Officer for the company. Bill comes to us from Napster where heserved as Chief Technology Officer and Senior Vice President since 2000. He wasthe Chief Technology Officer for Universal Music Group, which was subsequentlyacquired by Roxio, Inc. And in 2003, this served as the basis for a re-launchof Napster service.

Previously, Bill spent more than a decade at IBM where heheld various technology and management positions, as well as, oversaw theresearch and commercialization of technology for IBM product divisions. Billhas significant experience in developing innovative products that significantlyenhance the user experience, as well as, a strong track record in leadingchange management initiatives.

At Napster, Bill built a technology organization, platformand services from the ground up and was responsible for the re-architecture ofmajor subsystems to enhance scalability, as well as, led the company'sinternational and mobile rollout. So welcome, Bill.

In summary, I'm very excited about the momentum that we arecarrying into 2008. The demand for our services is increasing, particularly inour consumer and professional advertising and sponsorship programs. We're verypleased with the reception to our new advertising products and in theirsignificant potential to accelerate our future growth.

We have demonstrated our ability to profitably deliverrevenue growth, while at the same time continue to make the necessaryinvestments in our technology, in our infrastructure and in our people to drivethe success of our enterprise for many years to come.

I'd like to now turn it back to Mark Funston.

Mark Funston

Thanks, Wayne.

Turning now to HLTH financial results: Consolidated revenuefor the September 2007 quarter was $133.3 million, compared to $299.7 million ayear ago. Adjusted EBITDA was $29.3 million or $0.16 per share in the September2007 quarter, compared to $59.6 million or $0.20 per share a year ago. Andincome from continuing operations in the September 2007 quarter was$16.1million or $0.08 per share compared to $22.4 million or $0.07 per share ayear ago.

As a reminder, when comparing the results for the quarterended September 30, 2007, with the prior-year period, please consider that forthe September 2007 quarter, our 48% portion of Emdeon Business Services incomeis reflected in the line item Equity and Earnings of EBS Master LLC, whereasfor the prior-year period, the results of Emdeon Business Services wereincluded in our consolidated revenue and earnings.

Because of this required presentation, our reportingregarding EBS as well as our consolidated results will not be comparable to therespective prior-year periods until after we reach the anniversary of thetransaction.

Additionally, please note that HLTH's prior-period resultsreflect the impact of the change in the prior year's income tax provisionrelated to the accounting treatment of tax-deductible goodwill amortization,which I had discussed on prior conference calls this year. This change impactednon-cash deferred income tax expense in prior periods. HLTH filed an amendedForm 10-K on May 10, 2007, to revise its prior-period results.

Looking at our segment results specifically, ViPS segmentrevenue was $24.3 million for the September quarter, down 2% from $24.8 milliona year ago, primarily due to a decrease in professional consulting servicesprovided to governmental agencies. ViPS segment adjusted EBITDA was $4.8million or 19.8% of revenue, down from $5.3 million or 21.3% of revenue a yearago.

As we mentioned during last quarter's conference call, theshortfall in revenue and adjusted EBITDA this quarter was due to the unexpectedcancellation of one contract. This cancellation was the result of lack ofdelivery to CMS by another vendor unrelated to ViPS. This left ViPS with nowork to take on under its portion of the contract.

On September 14, 2007, ViPS was selected as an informationtechnology partner by the Centers for Medicare & Medicaid Services, CMS. Inits new contracting vehicle named Enterprise Systems Development or ESD, CMS isexpected to procure a majority of its information technology development workfor the next 10 years under this new contract, and it has set a maximum ceilingof $4 billion on the value of contract to be awarded under this vehicle.

ViPS is one of eight large business awardees. With ESD nowbeing awarded, we believe the pipeline will be strong and there will besignificant opportunities for us in 2008 and beyond.

Porex segment revenue was $21.9 million for the Septemberquarter compared to $21.3 million a year ago, an increase of 3%, drivenprimarily by growth in our surgical products combined with the impact offavorable foreign currency exchange rates. Porex segment adjusted EBITDA was$6.4 million versus $6.1 million in the prior year, an increase of 5%.

Operating margins increased to 29.5% from 28.8% in theyear-ago period, primarily due to the higher revenue, as well as, lower directmanufacturing costs relating to the mix of products produced, which can havevarying gross margins.

Porex continues to generate consistent results,demonstrating strength this quarter in its surgical products. Porex continuesto improve its manufacturing processes in order to generate efficiencies,reduce costs and improve the quality of its products.

Porex has several new patented applications and continues tointroduce new products to replace aging applications. With facilities locatedin the United States, Europe and Asia,Porex is strategically positioned to meet the needs of its customers as theytransition their businesses globally.

Porex's future revenue and earnings growth is expected tocome from new applications and patented products, which includes its recentpartnership agreement with a global leader in the industrial wastewaterfiltration market.

Corporate expense for the September 2007 quarter was $6.1million or approximately 4.5% of consolidated revenue compared to $11 million ayear ago. As we noted in past quarters, we are providing certain transitionservices to EBS Master LLC and Sage. The fees we received for these services inthe September 2007 quarter were $1 million compared to $0.3 million a year ago andare included within the corporate segment as an offset to the cost of providingthe related services.

There were additional scheduled reductions in headcountduring the quarter, and we were able to consolidate some space within our New Jersey corporate office, which enabled us to reduceour overhead to better reflect the current ongoing operations.

Briefly touching on our investment in Emdeon BusinessServices, EBS delivered strong results in the third quarter. While notconsidered an operating segment any more, we recorded $8 million of equity andearnings of EBS LLC in the September 2007 quarter, reflecting our 48% portionof their income.

Revenue was $203 million, representing another recordrevenue quarter and continued to be (inaudible) Net interest income for thequarter was $6.3 million compared to $1.9 million in the third quarter of theprior year. Increase in interest income was primarily due to higher cashbalances upon the higher interest rates during the current year period.

Finally, while we do not project, or include, expensesrelated to the DOJ investigation in our guidance, our third quarter results didinclude $373,000 in expenses HLTH incurred related to this investigationcompared with $1 million for the same quarter last year.

These costs are for the legal and related expenses that thecompany incurred in connection with the investigation. These expenseshistorically have been, and will continue to be, presented on a separate linecalled: “legal expense” within continuing operations.

Turning to our balance sheet, as of September 30th, 2007,HLTH had approximately $784 million in cash and short-term investments on aconsolidated basis. This amount includes $278 million in cash and short-terminvestments held by WebMD.

Operating cash flow from continuing operations in theSeptember 2007 quarter was $35.7 million compared to $36.4 million a year ago.These cash flows reflect higher cash flow in the current quarter from ouroperating segments as well as reduced corporate expenses and higher interestincome when compared to the prior-year period, offset by a decrease over theprior-year period in cash flow from EBS due to EBS being treated as an equityinvestment in the current quarter. While we shared 48% of EBS earnings, we didnot receive cash distributions from this investment during the quarter.

Our capital expenditures for the September 2007 quarter were$5.6 million compared to $10.8 million a year ago. Cash flows during theSeptember 2007 quarter include the receipt of approximately $10.8 million fromexercising of stock options, of which $8.7 million is related to HLTH stockoptions. Additionally, we used approximately $4 million to repurchase shares ofour common stock during the quarter at an average price of $13.23. So total outstandingshare count as of September 30th, 2007, was $180.3 million.

Turning to financial guidance for Q4, HLTH's fourth quarter2007 guidance is updated as follows: HLTH revenue guidance range is $140.9million to $145.9 million. HLTH adjusted EBITDA guidance range is $36 millionto $39.2 million. And HLTH's guidance range for income from continuingoperations is $16.7 million to $20 million.

These changes to our fourth quarter guidance primarilyreflect the changes to WebMD's guidance that I discussed earlier. As a resultof the possible changes to the corporate structure as described by Martyearlier, we will not be providing 2008 guidance for HLTH at this time. As areminder, our press release, including comparative financials and a summary ofour 2007 guidance, is available on our website.

Operator, at this time, we would like to open it up forquestions.

Question-and-AnswerSession

Operator

(Operator Instructions)

We will go first to Heath Terry with Credit Suisse.

Heath Terry - CreditSuisse

Great. Thank you. I was wondering if you could just talkabout what kind of changes, what you are seeing as you move up in the rankingson Google and we've certainly noticed that, how immediate is the change thatyou are seeing in traffic from the search engines, the [natural] searchengines?

And do you have the kind of granularity to talk about thedifferences in traffic that you are seeing in keywords or subject areas whereyou have high ranking on certain search results versus those where you arestill lagging?

Wayne Gattinella

Yes, Heath, this is Wayne.We have seen, since we implemented our new technology platform in the firstquarter, a continuing and a steady increase in our search engine optimizedtraffic as we continue to focus on moving WebMD up in a sort of the freerelated search results.

One of the impacts is that the “pages per user” you couldsee it has come down a little bit over the past couple of sequential quarters,because the optimized traffic that you get from search engine referralstypically goes directly to an article on the site rather than the homepage onthe site. And the result is you tend to see slightly less page utilization,although over time, we expect that to turn around as we create new WebMD users.

We have focused primarily on the areas where sponsors aremost interested in driving their promotion and ad programs. So to your questionas to where we've kind of invested most of our initial time and effort, it'sbeen in those key areas in targeted terms that are most relevant towards thebiopharma market, so in key condition areas, key lifestyle, health andmanagement areas and sort of the long tail terms that relate to that.

But we’ve been pleased with the progress to date. It's acontinuing process. It's not something that is by any stretch sort of acheckbox and complete. It's an area that we will continue to optimize andimprove and it over time will become a more significant part of our revenue mixas we focus on it.

Heath Terry - CreditSuisse

And since the partnerships that you sign generally aren'tdirectly tied to page views: how long does it generally take for an increase inrevenues or increase in page views, say, you see a 10% increase in total pageviews across the site to show up in revenue?

Wayne Gattinella

It depends on the areas. I mean there are certainly someareas in the disease conditions that have low incidence and very high value.And then, of course, in the broader lifestyle areas, the demand curve tends tobe a little bit broader. So it really depends on the condition area itself. Itcan be very quick in the most highly targeted areas. And in the other areas, itcan take longer to monetize.

Operator

And we'll take our next question from Anthony Noto withGoldman Sachs.

Jen Watson - GoldmanSachs

Hi, this is Jen Watson in for Anthony. Just a question onthe ad and promotion segment: if you could discuss the slightly weaker thanexpected results relative to the original guidance in Q3 and Q4? I know withrespect to the private portal business, the sale cycle is lengthening. But, interms of the ad and promotion business: if you could go into a little moredetail there? And, also: if you could provide us with the number of brands thatadvertised on the WebMD platform this quarter?

Wayne Gattinella

Sure. With respect to the sales activity during the thirdquarter -- our sales year actually begins in the fourth quarter, October 1 andcompletes September 30th the following year. So we actually in the thirdquarter completed the 2007 sales year.

The last quarter Q3 was our strongest sales quarter ever.There was tremendous continued demand in the biopharma marketplace. We sawreally for the first time several customers come in and start to enter the 2008ad market early and start to lock in some particular areas of the siteobviously of interest for them next year.

We saw strong interest in several of the new products andservices that we launched several months prior, and it was a great way to bothsort of end the 2007 year, but also in some respect, begin the 2008-year giventhat we saw some advanced buying coming to the marketplace.

As we explained, the mix of those quarter three sales ismore weighted from a revenue standpoint towards 2008 than we had originallyanticipated. Some of that is because of the upfront buying, but other parts ofit -- other reasons are that it's taken longer for some of these more highlypersonalized and sophisticated services to go through the medico-legal reviewprocess inside of large pharma.

So we don't really see any impact in terms of the ultimatevalue of the contracts that we are signing, but, unfortunately, the timing ofthe implementation of those contracts has bled into 2008 more so than weoriginally planned. We did see some programs scale back as a result of some FDAactions, particularly in the diabetes areas.

You saw products like Avandia and Actose go through somechanges in the market, and therefore their investments changed. EXUBERA waspulled off the market really because of low sales, not necessarily an FDAaction. Zelnorm was pulled off the market towards the end of second quarter,which was a big lifestyle product. That had some effects as well, but it really,overall, has not really changed the overall demand that we’re seeing in themarket importantly on both the consumer as well as our professional sites.

Jen Watson - GoldmanSachs

Great. And then if you could just provide the number ofbrands that are advertising?

Wayne Gattinella

Sorry. That number is 500 in the third quarter.

Jen Watson - GoldmanSachs

Great. Thank you.

Wayne Gattinella

You're welcome.

Operator

We will go next to Sandy Draper with Raymond James.

Sandy Draper -Raymond James

Thanks and good afternoon. A couple of quick questions. One:I'd be interested, Wayne, if you couldtalk a little bit more about the comments about the increased competition fromdisease management? Is that really around the Subimo area and is their reactionto you guys making waves or is it that they are just coming down into themarket on their own?

Wayne Gattinella

It's probably a little bit of both, Sandy.In the private portals market, as you are aware, we've launched several newproducts in the clinical services area and moreover with health coaching in thecare management side. And we are seeing increasing competition from other caremanagement companies, both payors as well as specialized care managementcompanies in that space.

So we are kind of bumping up against some of the servicesthat they had offered in the past. And, at the same time, we are seeing anincreased sort of competitive set of initiatives from some of those companiesalso trying to provide kind of skinny-downed versions of what we provide withour health portal in the same situation.

The net result is that we have seen it slow the decisionprocess down for companies that are already using care management services, asthey are looking at sort of the total picture and the potential to buy thecomplete bundled service, which is what we are selling.

And even, overall, in terms of presenting those totalclinical and care management services, the sales are a little more complex.It's a bit more sophisticated. The idea of Clinical Decision Support rules tiedto lifestyle coaching has just been a longer sales cycle.

Our response is, is that we plan to offer comparable bundledofferings either through partnering or aligning with other care managementproviders. But those are relationships that we're in the midst of pursuingright now in order to be more competitive in this now sort of overallcomprehensive health management marketplace.

Sandy Draper -Raymond James

Okay. Great. And then maybe a follow-up to the questionprevious, obviously we have seen some tougher times in big pharma. The resultshaven't been that stellar, seeing some pullback. But it sounds like you aren'tseeing any real slowdown in what they are willing to spend. I just want to makesure I'm hearing that right that you aren't seeing the pharma customer saying,because of our challenges we are pulling back on internet spending.

Wayne Gattinella

We are not seeing that. There were some particular productsthat had issue in the market that's not necessarily an unusual event. Thathappens from time to time. But overall, both our sales activity during thequarter being extremely strong and the revenue growth for our biopharmaadvertising in the third quarter also demonstrating strong growth relative tothe natural growth in the market.

I mean: the numbers that I see in terms of internet, thegrowth of display advertising on internet advertising overall is about an 18%kind of growth rate. If you take out sponsored search and you take outclassified advertising, display advertising in 2007 is estimated to be growingat about 18%. So we are clearly growing faster than market.

We are not seeing a slowdown with respect to what we providein the biopharma market. And if anything, the value of our programming, both onthe consumer and professional side is far stronger than the traditionalmarketing methods that pharmaceutical companies have used in the past. So wesee this as an opportunity.

Sandy Draper -Raymond James

Okay. Great. And one final question, and I'll jump back inthe queue. And I think this one is for Marty. Marty, when you look at theproposed transaction, obviously as you said, you are setting up two separategroups to basically do independent evaluations.

But, I'm just curious in terms of thinking: when you arebuying out, or potentially buying out HLTH, part of it obviously an impliedasset value for WebMD is, do you guys have a view where you think -- is it justbasically market value WebMD trades or are you going to have your ownassessment of where you think WebMD what it's worth and what you are willing topay for that? Thanks.

Marty Wygod

That's a fairly complicated question. And the committee, theindependent committee of WebMD may look at it differently than we look at it.And this is going to be a series of negotiations that will take place in theimmediate future. And as soon as we reach a conclusion, and really isacceptable terms to both sides, we will be able to disclose that with all thedetails to the public.

Sandy Draper -Raymond James

Okay. That's a fair answer. Thanks, Marty.

Operator

We'll go next to [Rob Kelly] with Smith Barney.

Rob Kelly - SmithBarney

What is the degree of confidence in the guidance you havegiven us?

Wayne Gattinella

We feel very strong about the guidance that we are providingfor 2008. We are entering the year with a very strong backlog in ouradvertising marketplace. We, as I mentioned, finished a strong period in thethird quarter from a sales standpoint. We are seeing the size of the deals thatwe are closing in the market continuing to increase. And we believe that wehave the potential for strong upside. We announced the Yahoo! agreement only aweek or two ago, that not only gives us better financials for sponsored searchon WebMD, but gives us a larger network to be able to provide to our clientsand expands the level of sponsored promotion in the market overall.

We are continuing to see a shift in spend on the behalf ofbiopharma, which benefits WebMD. We only see that getting stronger both on theconsumer and professional side. All of the core assumptions behind our businessstrategies are stronger today than they have been any time before.

So we feel very good about our 2008 direction.

Rob Kelly - SmithBarney

Can give us more color and detail on the contracts that arecoming into next year such as the size of the contracts, length and who they arewith?

Wayne Gattinella

Well, let me answer that in a way that I can, withoutdisclosing the confidential information within the contract. Again, as we haveclosed out our sales period for September, we have seen a much strongercommitment to WebMD online spending with virtually all of our major pharmaaccounts than any period prior. The number of products that we are working with[inside] of our customers, the depth of information and programs that we areworking with our customers, the level of spend of course that is related tothose relationships is stronger than it's been.

We have a much larger sales force entering 2008 than anytime before. We have continued to grow that organization, both from anexperience standpoint and just coverage standpoint. And again, we view the coredynamics in 2008 as, a very strong place to be able to spring board ourstrategy for the future.

Rob Kelly - SmithBarney

Thanks. One last one, Wayne is, besides the products youmentioned that were pulled, were there any contracts of size or substance thatwere canceled in 2007?

Wayne Gattinella

No. At the very beginning of this year there were some.There was a couple of product situations at Amgen, that they were having intheir core business that created a little bit of a pullback. But since -- nowwe’re going back almost a year ago, talking about December and January. Butsince that period we haven't really seen anything of significance.

Rob Kelly - SmithBarney

Thanks very much.

Wayne Gattinella

You're welcome.

Operator

Our next question comes from Corey Tobin with William Blair.

Jeremy Lopez -William Blair

Thanks. It's Jeremy in for Corey. Wayne,you have talked in the past about the trend towards having discussions withyour customers at a higher, whether it be the C-level or just below that level.I was wondering if that's a trend, it sounds like it is, but is that a trendyou had continue to see?

Wayne Gattinella

Yeah. It is a trend. We I mean from a personal standpoint, Ispend as much time as I possibly can or as much time as people will give metelling our story at the highest levels of biopharma, because our feeling hasbeen that, while at the product management level, what we do is pretty wellunderstood and valued, as you go higher up into the organization it'spotentially less so.

I was invited to speak at Business Council several weeksago, which is a CEO only organization and tell the WebMD story. As this year'sevent they chose healthcare as the significant topic of discussion. I havepersonally spent, on a one-on-one basis, time with virtually every major pharmaCEO over the last six to eight months period. And most importantly, thatengagement has been about their business, the transformation that they see asneeded in both the direct-to-physician marketing side as well as, to someextent, direct-to-consumer and we are seeing the impact of that. That is theinterest and value that the most senior management in these organizations placein this so-called new channel marketing approach.

It gives us great air cover to go in and play a much morestrategic role in these companies and that's really the core of our businessplan. Not to be a pure, kind of pure playing media channel, but to be able touse the engagements that we have with those physicians and consumers at a muchhigher level and it's working.

Jeremy Lopez -William Blair

Do you anticipate or have you seen the average deal sizethat you are doing as a result of that increase recently? Or any trend you havenoticed along that line?

Wayne Gattinella

Our deal size is increasing. Our overall spend by account isincreasing. The adoption of our new services is faster than I have seen anytime before in terms of the time cycle between new product introduction andpurchase. And as I mentioned and I think it's an indicator, I don't want tomake too big of a deal of it, but for the first time in the third quarter, wesaw several pharmas come into the market and start to contract for 2008programs.

Jeremy Lopez -William Blair

Right. And it sounds a kind of follow up, finally, on aquestion that was asked earlier, but would you say it feels like you are goingto leave, exit 2007 with greater backlog coverage or greater visibility, basedon other metrics you guys look at? Then relative to the guidance, thepreliminary guidance you have given, relative to what you guys guided to lastyear and the visibility you had on that?

Wayne Gattinella

Our backlog -- advertising backlog going into 2008 isgreater than what we saw the same period a year ago. There's no doubt.

Jeremy Lopez -William Blair

But, in terms of coverage, though, do you feel like thecoverage will be greater?

Wayne Gattinella

I'm sorry, “coverage” meaning?

Jeremy Lopez -William Blair

Meaning: that the visibility you have relative to theguidance? Thank you.

Wayne Gattinella

Yeah, I would say, yes.

Jeremy Lopez -William Blair

Thanks. Okay.

Operator

We will go next to Mark Mahaney with Citi InvestmentResearch.

Mark Mahaney - CitiInvestment Research

Thank you. I wanted to ask two questions. The first has todo with the Yahoo! relationship. Is there anyway to gauge the materiality orthe time to ramp up of that relationship? And secondly, just a question, andmaybe you covered it, relating to the balance sheet and the deferred revenue.It sounds clearly like the advertising backlog is building up. And yet thedeferred revenue was down sequentially for the first time in eight quarters orsomething like that. Is there any particular, could you just square those two?Thank you very much.

Wayne Gattinella

Mark, I will comment on the Yahoo! relationship. I will haveMark Funston comment on the deferred revenue. Two parts to the newrelationship, one is sponsored search. That is actually up live on the sitetoday. So if you go onto WebMD and into our search area and search on thehealth terms, you will see that the sponsored results are provided by Yahoo!That went up November 1st.

It's a multi-year relationship and suffice it to say thefinancials are better for us than the prior relationship we had. Butimportantly, the second part of that relationship gives us exclusive rights tosell Yahoo!'s network inventory in the healthcare market to a behavioraltargeted kind of product where we are able to target WebMD users on Yahoo!. Andthat's not a small point, because for every visit we get on WebMD each month,that same visitor is on Yahoo! at least ten more times in non-health areas.

And so, to be able to profile and target that user withrelevant marketing and advertising messages gives us much stronger reach thanwe have on WebMD alone. It provides a much more relevant marketing message forthe consumer and certainly for the advertiser gives us much greater scale thanon WebMD alone. And so we see it as the combination of two great brands with avery strong health involved user on WebMD with high quality, very strong usageon Yahoo!.

In terms of the ramp up, we are right in the midst of someof the operational mechanics of the relationship. We are in market havingdiscussions with customers about the new products and programs and we do expectto start to see the impact of the new network relationship early in 2008. Youwant to answer that Mark.

Mark Funston

Sure. As far as the fluctuation in the deferred revenues,that's really more a function of the timing of billings. We will see deferredrevenues fluctuate really just based on the timing in the quarter of billingsand collections.

Mark Mahaney - CitiInvestment Research

Thank you, Mark. Thank you, Wayne.

Operator

We'll go next to Brian Pitz with Banc of America.

Brian Pitz - Banc of America

Thanks. Just any comments on potential upside from an adbudget fuss in Q4 this year? I know, you had one last year, which was prettyhelpful to Q4. And can you comment as to whether or not this is in yourguidance? And then the second, which is more of a follow-up to the previousquestion that was asked, can you comment on the CPM differentials betweenadvertising on WebMD, in pages as well as advertising on Yahoo! to any extent?Thanks.

Wayne Gattinella

In terms of Q4, Brian what we have in our guidance is whatwe expect, if you will, based upon the current pipeline of activities thatobviously we expect to close and add to the existing backlog. It's hard topredict whether what we saw a year ago, which was a sort of media spike, andsome of the budgets were flushed out. In December it's going to occur again,but again it's not necessarily something we were planning on. So it's just notsomething that you necessarily would bank on. In terms of CPMs, I assume youwant -- your question was WebMD -- CPMs as compared to WebMD behavioraltargeted CPMs with Yahoo!?

Brian Pitz - Banc of America

Yes.

Wayne Gattinella

What we expected is that we will retain premium pricing onWebMD because of the value of the contextual experience when the user is onWebMD engaged in the topic area and promotional programming is introduced inconcert with the topic that that user is most looking for at that point intime. As that same qualified user bleeds over to Yahoo! it's not that theirinterests have changed. But certainly they might be in a different content areaas the customized WebMD promotional ad is appearing. So, clearly the pricingfor a behavioral targeted ad is going to be less than WebMD's premium pricing.

But we see that as a benefit because it gives us the abilityto create a sort of a blended [rate] in the market in a way that doesn'tdenigrate our own pricing but provides the advertiser with a more efficient wayof reaching a health involved consumer at a, sort of a lower effective CPMoverall.

Brian Pitz - Banc of America

Great. Thanks.

Operator

We will go next to [John Kelly] in Citigroup.

John Kelly -Citigroup

Hi Wayne. From what you told us, the private portal in thepublishing business, it seems the rate of revenue growth and profit margin youprojected for 2008 is going to be substantially lower than the projections forthe consumer and physician portals than the --my question is: why is that andthe reasons and are you doing anything about it?

Wayne Gattinella

Yeah. In the private portal business, we were seeing thecycle time from sale to ultimately implementation continuing to lengthen. Thereis still demand in the marketplace, the idea of consumerism, which is the wholebasis for selling our health and benefits portal has not changed. I think therehas been somewhat of a slower ramp for health savings accounts than the marketoriginally expected, but nevertheless it's a trend that will continue. So thecore dynamics in the market are as strong as we have seen in the past.

But with our push into new services that are more behavioralbased like health coaching, the deeper sophistication started to slow the salescycle earlier this year. It's creating a more competitive sell because we areentering sort of a marketplace that, in some cases, was already represented bycompetitors and, in other cases we are seeing competitors enter that market aswell.

So we were not expecting that our sales activity willmarkedly be slow. We are however seeing the revenue slowdown because the mostsignificant seasonality for new implementations is in the third and fourthquarter. So even the sales activity that does take place as we enter 2008. Forthe most part, isn't going to have much revenue impact until the latter part ofthe year and you see that. You'll see that in the numbers that the revenuepickup really in that segment, it really doesn't come until the back half of2008.

John Kelly -Citigroup

Thanks, Wayne.

Operator

We will go next to James Kumpel with Friedman, Billings,Ramsey.

James Kumpel -Friedman, Billings, Ramsey

Hi, good evening. This is for Marty. Marty, can you talk alittle bit about how you'd handle -- at least under your conceptual plan, howyou'd handle the convertible notes that HLTH has now and how the NOLs would beaffected?

Marty Wygod

Sure. On the convertibles, they're whenever the final termsare negotiated between the special committee at WebMD and HLTH, would bebasically the same terms that would be received by the convertible holders.These are all covered in the indenture currently.

So you just read the indenture and you can see exactly whatwould take place. This was all contemplated. And what was your other question?I'm sorry.

James Kumpel -Friedman, Billings, Ramsey

On the NOLs and then the operating loss carry forward?

Marty Wygod

Whatever the NOLs are that are left over, which will besubstantial, after the divestiture of the three assets at HLTH (TechnicalDifficulty).

Operator

We will go to our next question with Anthony Petrone atMaxim Group.

Anthony Petrone -Maxim Group

Good morning guys.

Marty Wygod

(inaudible).

Anthony Petrone -Maxim Group

Everything clear I don't know I we are…

Marty Wygod

Okay. Let me try and get back to that. The NOLs will beinherited by WebMD on the merger, whatever the NOLs are that are left over atHLTH after the sale of the assets which should be fairly [considerable](Technical Difficulty).

Anthony Petrone -Maxim Group

Great. Just a couple questions for Mark in terms of G&Aleverage. It seems that that ticked down substantially sequentially, on anabsolute basis it was flat, but how much more leverage is left there goingforward? And it seems that that has substantially increased since the infrastructureupgrades and flagship portal have been completed?

Mark Funston

As we said, we continue to see strong leverage and wecontinue to expand our -- the incremental margins on our incremental revenuesand we think we can continue to do that.

Anthony Petrone -Maxim Group

In terms the Yahoo!, agreement, just in terms ofcannibalization, do you see any risk? How is the sales force going to approachthis, in terms of initial sale of Yahoo! inventory? Is there is a risk thatsome customers may initially opt Yahoo! inventory or shortly into theagreement, instead of coming back for additional WebMD inventory, will they optthe Yahoo! inventory and how do you think that will play out?

Wayne Gattinella

We see this as only upside to our business. There is -- thecannibalization is somewhat of a non-issue because the context of our WebMDinventory is people who are deep into particular topic areas, whether they be,disease and condition areas, or lifestyle areas, and the value of being able todeliver sponsored content and information in that context is very strong andthat's the value we deliver in the market. What this gives us, is the abilityto also compete against the lower priced ad networks with a much higher qualityproduct because the profile of the user that is being sponsored is a WebMDuser. So the quality is unmatched and the network that that user is beingsecured on is the Yahoo! Network, which is also unmatched. Because, in the adnetwork, [what the] issue is you don't really know, when someone says: it's ahealth user, where did that part of that information actually came from? Meaning:how accurate is it? And what was the quality of the site it came from?

And you don't necessarily even know the site that it's beendelivered on. In this case, both the quality of the user as well as the qualityof network is known and we see it as only incremental.

Anthony Petrone -Maxim Group

That's great. And just in terms of 2008 guidance, I knowit's early on in this agreement, but: how much do you currently have in the wayof forecasting for the Yahoo! distribution agreements?

Wayne Gattinella

We were very conservative in terms of our expectations inour '08 guidance,

Anthony Petrone -Maxim Group

All right. Great. And just finally on the large clientcontracts, you mentioned earlier some preliminary purchases before the end ofthe cycle here. How much flexibility does some of your larger clients, what[former] clients have in their budgeting process? When you saw these initialpurchases, where they not really an entire contract being purchased or anentire block of inventory. Was it just kind of an initial process and can theyback away say midpoint during the year from what they've initially proposed?

Mark Funston

I'm not sure, if I get your question, but: if you're askinghow sound are the contracts? They are very solid. And we have a very lowcancellation rate.

Anthony Petrone -Maxim Group

All right. Great. Thank you.

Operator

We'll go next to [Denise Kong] at DeepHaven Capital.

Denise Kong - DeepHavenCapital

Hi. Actually I have a question again regarding the existingconvertible notes and if the transaction between HLTH and WebMD do complete asit is described, I believe that the obligor would be the surviving corporation,the WebMD.

Marty Wygod

That is correct.

Denise Kong -DeepHaven Capital

If you could, without going into the details of the terms,can you walk me through, of the sources and uses of cash that would be used byWebMD in order to merge HLTH into the company?

Marty Wygod

We'll be able to do that [this year] after we reach adefinitive agreement with the WebMD [special committees].

Denise Kong -DeepHaven Capital

Okay. That's all I have. Thank you.

Operator

Our next question comes from Neil Doshi with ThinkEquityPartners.

Neil Doshi -ThinkEquity Partners

Thanks, guys. My all questions have been answered. Thankyou.

Operator

We'll move on next to Geoff Dancey with Cutler CapitalManagement.

Geoff Dancey - CutlerCapital Management

Hi, my questions have been answered as well. Thanks.

Operator

(Operator Instructions). We'll take our next question from[Clark Wong] with Needham & Company.

Clark Wong - Needham & Company

Hi guys. You guys guided to about 20% organic revenue growthfor the private portal business and I was just looking at what you guys talkedabout, I think it was 16% this quarter in organic growth and 20% last quarter-- 27% last quarter. It looks like kind of a decelerating trend. What's goingto drive the re-acceleration to 20%?

Wayne Gattinella

Really, it's all based upon implementation of new business,which I know sounds obvious. But for us, as we just announced several newaccounts that were initially installed, because we spread the value of thecontract over its life, which is typically a four year period, the impact of anew program that gets implemented in October/November is fairly negligible forthe fiscal year.

So, taking the new business that's installing this quarter,first quarter and most importantly, the pipeline of business that we expect toinstall this time next year is what's going to get that business back on agrowth track. And for us it's really, the focus right now is on sales cycles,being able to get new contracts in the market in a timely enough period thatthe revenue impact of that business has meaning in the current fiscal year.

Again, as we've said, we see that by the second half of2008, we expect to see the growth curve of the business reflect itself on therevenue line, but it's going to still take another couple of quarters of strongsales activity to be able to do that.

Clark Wong - Needham & Company

So, does that mean you guys are kind of projecting inshortening sales cycles as compared to what you're seeing right now?

Wayne Gattinella

No, not necessarily. We're simply seeing the sales activitythat's currently underway to catch up from a revenue standpoint this time nextyear.

Clark Wong - Needham & Company

Okay.

Wayne Gattinella

We're not predicting the sales cycles are going to shortenright now.

Clark Wong - Needham & Company

Okay. And on the content syndication and publishing side,the business has kind of been declining the past couple quarters and it lookslike you guys are projecting for some stabilization. Is there something goingon there, perhaps can you just give us a little more color?

Wayne Gattinella

Honestly, I think you're just seeing most of the legacybusiness just sort of flush itself out. What's remaining is some of the medicalreference products and also WebMD, the magazine, which is an advertisersupported product. Does have some growth, it's not -- it was really a brandingmechanism. It was never meant to be a high growth product, but it is growing inthe market. It is profitable. And that's, over time, that's most of what's leftas you look towards the future.

Clark Wong - Needham & Company

Thank you.

Operator

We'll go next to Alex Lach with Camden Asset Management.

Alex Lach - Camden Asset Management

Hi. Just a follow-up on the convertible question. Am Icorrect that the proposed structure goes through that the [three andone-eighth] convertibles will be convertible into stock of the company and theone and three quarters will be convertible into the combination of stock andcash?

Marty Wygod

No, I don't believe so. But I think we'll reserve allcomments on that until we announce to the Street the definitive terms that wehave come to with WebMD. And each indenture speaks for themselves.

Alex Lach - Camden Asset Management

Thank you.

Operator

And our last question today is a follow-up from Corey Tobinat William Blair.

Jeremy Lopez -William Blair

One quick follow-up on, do you have any commentary, can youprovide any commentary on what form of tax election you anticipate HLTHCorporation would take if it is indeed purchased by WebMD?

Marty Wygod

Not at this time.

Operator

And there are no further questions. I'd like to turn thecall back to our speakers for any additional or closing comments.

Wayne Gattinella

I would like to thank you all for coming and I believe this callis available online as well as through a 800 number that is also posted on oursite as well.

Marty Wygod

We'll be back to the Street as fast as we can and as soon aswe reach conclusion with these special committees, to clarify any of theambiguity that exists at this point.

Operator

And as a reminder, if necessary, there is a replay availableof this call, which can be accessed toll-free by dialing 888-203-1112 or if youare calling from outside the US719-457-0820. The passcode is 4633902. There is also the webcast replayavailable on HLTH Corporation's and WebMD's website as well. Again, that doesconclude today's conference call. Thanks for joining us.

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