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WebMD Health Corporation (NASDAQ:WBMD)

Q1 2012 Earnings Call

May 1, 2012 4:45 PM ET

Executives

Risa Fisher – VP, IR

Martin Wygod – Chairman

Anthony Vuolo – Interim CEO and CFO

Analysts

Heath Terry – Goldman Sachs

Steve Rubis – Stifel Nicolaus

Kevin Copeland – Cowen & Company

Ignatius Njoku – Wells Fargo Securities

Mark May – Barclays

Andrew O’Hara – William Blair

Gerard Heymann – JP Morgan

Scott Kessler – S&P Capital IQ

Operator

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

Risa Fisher

Good afternoon. This conference call is to discuss WebMD’s first quarter results. The earnings release issued today by WebMD is available at wbmd.com in the Investor Relations section. The release includes reconciliations between GAAP and non-GAAP financial measures which will be discussed during this call. The explanatory paragraphs in the release concerning forward-looking disclosures and related risks and uncertainties also apply to forward-looking disclosures made during this call, including those regarding our guidance on future financial results and other projections or measures of WebMD’s future performance. Information concerning the risks and uncertainties can be found in WebMD’s SEC filings.

Joining us on today’s call are Marty Wygod, Chairman of WebMD, and Tony Vuolo, Interim CEO and CFO. At the conclusion of our prepared remarks, we will open the call and take questions.

Now I’d like to turn the call over to our Chairman, Marty Wygod.

Martin Wygod

Thank you, Risa. Good afternoon and thank you for joining us today. As you saw in the press release issued today, our first quarter results were in line with the expectations we outlined on our last conference call. While the near-term outlook remains challenging, we believe that our long-term growth opportunities are significant and we are actively making investments to capture these opportunities.

In early April, we completed a Tender Offer, we repurchased approximately 5.8 million of our shares at a price of $26 representing approximately 10% of our outstanding shares prior to the Tender completion. We will continue to evaluate opportunities to create shareholder value with our strong balance sheets since the Tender and subsequent two weeks waiting period has been completed we have acquired an additional 127,000 shares in the open market purchases under our buyback program.

The CEO search is of great importance to our company and I know that you’re all interested in the status of our process. Through our own network, as well as working with a nationally recognized search firm, we are identifying individuals with experiences and expertise that balance a cross section of critical skill sets. We have been meeting with potential candidates, the board is committed to conducting a thorough search process to identify the right person to lead the company and we hope to complete the search as promptly as possible. Importantly, though, we are making progress in key areas while the search is underway.

As Tony will discuss, we continue to make significant progress on the initiatives we discussed on our last call. We continue to have strong traffic growth. We are executing on improving our site experience for our audience by focusing on personalization and tools that provide a greater capability to manage ones health. We are making good progress in both re-designing and developing new content areas to further drive user engagement. We continue our efforts to better illustrate the value we are delivering to our advertisers. Our discussions in securing commitments from new pharmaceutical brands expected to be approved later this year and early next year have been very encouraging. We continue to invest in our products to provide our advertisers with the most efficient and effective communication shadow to both patients and physicians.

Looking longer-term, we are also engaged in key discussions regarding strategic partnership, alliances and potential acquisitions in a number of important areas. We’ll be launching a German language version of Medscape for physicians later this year and we’re in discussions with strategic partners to launch in other international markets as well. We are dedicating resources to evaluate and develop functionality that facilitates patient-physician connectivity in a variety of different ways. We’re also evaluating opportunities to create new revenue streams beyond our traditional pharmaceutical and consumer products customer base. We have recruited new talent to help execute on these new initiatives and will continue to recruit additional management while we complete our CEO search.

I want to thank all of our employees for their efforts in the last few months. Teams across the organization are working tirelessly to execute on these and other initiatives. We are committed to doing all that we can to restore the company’s growth rate. The assets assemble that WebMD cannot be easily replicated and are strategic advantages make us a strong market leader. We are focused on improving all the elements that are within our control to drive shareholder value.

I’d now like to turn the call over to Tony.

Anthony Vuolo

Thanks, Marty. Turning to our first quarter results. Our results are in line with the guidance we provided in February on our last earnings call. Our first quarter revenue was $106.9 million compared to $131.6 million last year. Public portal advertising and sponsorship revenue was $87.8 million, and private portal services revenue was $19.2 million. First quarter adjusted EBITDA was $11.3 million or 10.5% of revenue.

During the first quarter, we recorded a pre-tax gain of $8.1 million related to our option on the auction rate securities that we sold in 2010. We no longer have any remaining positions related to this auction rate securities option as of the end of March.

Additionally, during the first quarter we recorded a pre-tax expense of $1.2 million related to the departure and replacement of the former CEO and a pre-tax stock compensation expense of approximately $8 million related to the previously announced voluntary surrender of approximately $1 million shares of out-of-the-money stock options by WebMD executives at offices throughout (inaudible). Although these options were voluntarily surrendered for no consideration, the accounting rules require that any unrecognized stock compensation be immediately expensed as a result of the surrender.

First quarter net loss was $7.8 million or $0.14 per diluted share compared to net income of $19.5 million or $0.32 per diluted share in the prior-year period. Operating cash flow was $15.5 million for the first quarter. This includes $5 million of interest payments related to the 2.5% convertible notes issued last year. As we 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 a convertible debt and the billing and collection of receivables from our customers. Capital expenditures were $3.4 million for the quarter.

During the first quarter we repurchased more than 15,000 of our common stock at an average price of $26.57 under our buyback program. As of March 31, 2012, we had $1.1 billion in cash and cash equivalents. Subsequent to the end of the quarter, we used $150 million of cash to repurchase 5.8 million of our common shares in the Tender Offer, which was completed in early April. These shares represent about 10% of the common stock outstanding prior to the completion of the Tender Offer. Since the end of the quarter, as Marty mentioned, we also repurchased an additional $2.9 million at an average price of $22.53 under our buyback program. There was approximately 86 million remaining under our authorized buyback program.

Turning to financial guidance for 2012. Today, we updated our financial guidance to reflect the impact of the Tender Offer completed in April 2012 and a gain related to the option on the auction rate securities recorded in the first quarter. A schedule summarizing this guidance is attached to the press release issued today. Looking specifically at the second quarter of 2012, revenue is expected to be between $110 million and $115 million compared to $141.4 million last year. Adjusted EBITDA is expected to be approximately 10% to 12% of revenue. Net loss is expected to be approximately 4% to 6% of revenue. And we expect both the weighted average basic and diluted share count for the second quarter to be approximately 50 million shares.

In summary for the full year, revenue is expected to be between $500 million and $535 million. Adjusted EBITDA is expected to be approximately $100 million to $125 million. Net income is expected to be approximately $2.8 million to $19.9 million or $0.05 to $0.37 per diluted share. And we expect the weighted average basic and diluted share count for the year to be approximately 53 million and 54 million shares respectively.

Our outlook for 2012 has not changed since our call in late February. 2012 is going to be a challenging year as we deal with the impact of lower marketing expenditures by many of our pharmaceutical customers as they work through their particular challenges. We saw this in the first quarter. As you can see from our guidance for the second quarter, we expect these trends to continue.

As we stated on our last conference call, the low end of our annual financial guidance assumes a continuation of the trends that we are currently experiencing for the entire year. Our revenue expectations for the balance of the year include estimated revenue from current sales commitments as well as revenues from sales that we expect to occur between now and the end of the year. The timing and actual revenue from both current sales commitments as well as new sales can be impacted by a number of factors including changes in customer timing of their marketing programs, the timing of FDA actions or approvals, cancellations and our pacing of traffic through our programs.

Our financial outlook contemplates continued pharma budget constraints and we expect to see an increase in the number of new branded pharmaceuticals coming to market in 2012. The approval and launch of these products is not anticipated to begin until the second half of 2012 and therefore the marketing commitments that WebMD may expect to receive from these new branded pharma products is not likely to contribute significantly to revenue until 2013.

We continue to focus on putting ourselves in the best position possible to assist these pharma companies in getting their product messages to their relevant audiences. We have seen a positive reception in our advanced discussions with a number of brands expected to launch later this year and in 2013. However, we have seen delays in the FDA approval timing of several new products. We continue to monitor the pipeline of new approvals closely.

Traffic to the WebMD Health Network during the first quarter continued to grow strongly, reaching an average of 107 unique users per month and 2.52 million page views for the quarter, increases of 37.5% and 34.9% respectively from the prior-year period. These prior year comparisons exclude the traffic of our former affiliate partner sites, which were phased out at the end of 2011. Our traffic growth is attributable both to increased traffic from search engine optimization as well as the increased utilization of our Mobile apps and websites.

As we have mentioned on our prior calls, as a result of our commitment to publish the most credible, trusted and timely health content, we have benefited from the algorithmic changes made by Google in April of last year. We expect to continue to deliver strong traffic growth in 2012. However, keep in mind that the traffic growth may be lower than the first quarter as the positive impact of last year’s algorithm changes will already be reflected in the prior year comparisons.

Traffic to our Professional Network averaged approximately 2.6 million physician visits per month. We continue to believe that the WebMD Professional Network reaches more doctors and more healthcare professionals across more specialties, more frequently, in more countries than any other health information resource. Medscape is uniquely able to reach healthcare professionals across any digital device, whether it be a desktop computer, smartphone or tablet. Medscape is unique in its ability to provide a full range of specialty-specific news, perspectives, reference and education courses to physicians and healthcare providers.

While our traffic growth is strong, we remain committed to extending our market-leading position as the most trusted and credible source of health information for consumers and healthcare professionals. As we stated on our last call, we are investing in new content and new user functionality to provide even more value for our audiences. We are focused on creating new applications and products that will foster more frequent and meaningful engagement with our audience. We are building additional proprietary tools and applications that allow users to capture and store data.

During the first quarter on webmd.com, we launched an updated version of our Symptom Checker. The new Symptom Checker offers our audience a new, more personalized experience delivering WebMD’s trusted health information including images and videos based on specific symptoms. Symptom Checker has new content for over 700 conditions and users can now see which possible conditions best match their symptoms. Users can print the report to share with their doctors and there’s also an opportunity to save searches so that users can go back and view their past searches.

We will also be rolling out an improved Vaccine Tracker to manage and track vaccinations for the family. The tool currently provides recommendations and e-mail reminders based on gender and age to keep users up-to-date with their vaccinations as well as allows them to print histories for their doctors or school and camp forms. The overall usability of the tool will be greatly enhanced and will include the ability to track vaccinations that aren’t in the standard recommendations. We are also planning several enhancements to our lifestyle and content areas to improve our audience experience and drive further engagement.

In Mobile, we introduced new and updated apps. We had a very successful launch of the WebMD Baby app for the iPhone. We rolled out new releases of Medscape Mobile for iPhone, iPad and Android devices and we launched Medscape Mobile for the Kindle Fire platform. We introduced WebMD the Magazine to the iPad beginning with the March issue of the magazine. Later this year, we plan to release a greatly improved version of the flagship WebMD Mobile app along with new apps in specific health and wellness areas. In total, we have had over 11.5 million downloads of our WebMD Mobile apps for consumers and we’ve had over two million registered users of our Medscape Mobile apps, further solidifying our leadership position.

WebMD continued to be the most trusted brand of health information. In February, WebMD hosted a town hall event with First Lady, Michelle Obama. The First Lady, along with a panel of WebMD experts, joined together to answer questions from a live audience, as well as questions submitted on webmd.com regarding children’s health issues. We remain committed to leading the dialogue on important health issues.

We continue our efforts to incorporate additional data and analytics and insights into our product offerings. As the market leader, we strive to be at the forefront of better translation of audience engagement to value for the marketer. Currently, the ability to compare value created from digital marketing platforms to more widely used television and print channels varies greatly among advertisers, particularly when a multi-channel approach is being used. Enhancing our capabilities to more tangibly illustrate the value we deliver to our customers continues to be a key priority for us and we believe will serve as a catalyst for pharma marketers to move away from offline traditional marketing to digital platforms.

Looking at our Private Portal business, we are off to the best sales year that we have experienced in quite some time. We have received several significant verbal commitments for new business. We are in the process of finalizing contracts and working on the implementation of this new business and we expect most of it to launch in the fourth quarter.

In summary, we believe that by successfully executing on these and other initiatives we will be able to restore revenue growth. We know 2012 is going to be a difficult year for the company, its employees and our shareholders. Notwithstanding this, we believe that we have the right focus to succeed in this challenging environment.

Before I open the call for questions I would like to again express my appreciation to the management team and to all of our employees for their support over the last few months and their continued hard work as we tackle the tasks ahead.

Operator, at this time we’ll take questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from Heath Terry of Goldman Sachs. Your line is open.

Heath Terry – Goldman Sachs

Great. Thanks. Tony, I was wondering if you’d give us a sense of what you’re seeing in terms of traffic and monetization to your Mobile app and to what extent that’s impacting financials in any way at this point.

Anthony Vuolo

Well, in terms of the traffic to the Mobile apps, as I mentioned, traffic has been quite strong. From a monetization perspective we’re just beginning to incorporate some of that traffic into our product offerings for our clients, so they’re really not having a significant impact on the revenue line at this point. But that’s something – as we build our traffic base we intend to work into our product offering from a consumer perspective. From a professional perspective, that – traffic is also strong and we’ve already introduced the – from a monetization perspective, advertising and messaging opportunities into that platform. We did that at the very end of last year.

Heath Terry – Goldman Sachs

Right. And as you’re approaching advertisers about Mobile and inventorying kind of the sponsorship opportunity there versus what they’re used to buying online, what are the hurdles? Are they willing to consider that inventory as kind of like-for-like with your desktop? Or will the sponsorships and certainly with the regulatory kind of requirements around disclosures, will that look differently on Mobile than what you’re used to on desktop.

Anthony Vuolo

I think it will look differently on a smartphone. I think from a tablet perspective you can replicate the desktop experience and actually provide more interactive functionalities. The tablet is the – the I view is the equivalent if not a superior experience to the desktop, and on the smartphone, it will be a different experience given the size of the form factor.

Heath Terry – Goldman Sachs

Great. Thank you very much.

Operator

Thank you. Our next question is from Steve Rubis of Stifel Nicolaus. Your line is open.

Steve Rubis – Stifel Nicolaus

Hi. Thanks for taking my questions. First, our channel check suggested the advertising environment for WebMD remains weak and other companies have reported some weakness among consumer product grouped advertisers. Given your second quarter guidance and no narrowing of your fiscal 2012 guidance range, can you provide further details around what trends you’re seeing in advertising that makes the high end of the full-year 2012 guidance range achievable?

Anthony Vuolo

Well, as I mentioned earlier, I think that given where we are currently in terms of the backlog and the sales environment we have right now that translates to the lower end of the range. We’re pretty early in the year. And as we’ve talked about we have a lot of different initiatives going on and to the extent that those initiatives can add additional sales and revenue opportunity, that’s how you can get to the higher ends of the range. But at this point in time, as I said in my comments, given what we have both in our sales commitments in terms of the revenues that we expect to generate this year and what we’d expect to generate from future commitments, right now that’d be tracking to the lower end of the range.

Steve Rubis – Stifel Nicolaus

Got it. And then given the ongoing CEO search, can you provide some detail as to the qualities and experience you’re looking for in the new CEO? And then are you looking within the tech industry, healthcare, outside? Any sort of detail you can give on your search would be great.

Martin Wygod

Sure. This is Marty. Perhaps I can help you a little bit there. We’re looking at people that have experience obviously on the pharma marketing side as well as people with strong digital marketing background and we’re meeting several candidates on a weekly basis after we’ve eliminated quite a few before we even meet with them. And we’re hoping that in the next two months or so the Board is going to decide on who that individual will be.

Steve Rubis – Stifel Nicolaus

Perfect. Thank you.

Operator

Thank you. Our next question is from Kevin Copeland with Cowen & Company. Your line is open.

Kevin Copeland – Cowen & Company

Hi. Thanks. Could you give us any update on your project to deliver new ROI metrics to advertisers?

Anthony Vuolo

Sure. Well, we – that’s something that we are in dialogue with, with most of our larger clients. And part of the challenge with that is that every client has a different point of view in terms of the things that they value, the types of engagements or the downscreen insights that they look for. So we’re meeting with our clients and trying to put together analytics and insights that really kind of like meet their needs and how they evaluate digital marketing, particularly when they’re also marketing in other channels. So it’s something that we continue to focus on that we’re in dialogue with our clients. I think that it’s not going to be a one solution fits all because they all have different points of view. And we’ll work with our clients and craft a solution that fits what their perspective is.

Martin Wygod

And you can appreciate if we’re going ahead and doing a million on a brand in revenue and then spending $40 million on that brand on either on TV, print or feet on the street, so it’s very difficult at times to differentiate the contribution we’re bringing and in the further cause of it, it’s being caused by the other $39 million they’re spending in that space. But I think we’re coming up with some agreed-upon metrics that are reliable and much more credible than anything else that exists in the industry today.

Kevin Copeland – Cowen & Company

Okay. Great. Thanks. And then just looking at your strong page view growth are there any key drivers that you’d point out there besides the Google algorithm change and are you including your mobile page views in that number?

Anthony Vuolo

Yes we are. I mentioned that the growth was driven both by the strength we have from an SEO perspective given the investment that we’ve made in our content and the utilization of our Mobile apps and our websites. And they pretty much both equally contribute to the traffic growth.

Martin Wygod

Kevin, I think it goes a lot to the quality and the originality of our content.

Kevin Copeland – Cowen & Company

Okay. Thanks. And one last question. Given that you’re expanding into – you’re expanding Medscape into a German language version, can you just give us a quick update on Medscape France and how traction’s been there?

Anthony Vuolo

Yeah. The utilization of Medscape France is building. We launched Medscape France sometime in the second half of last year and we’re in the process now of building the traffic to the site and building out the feature function set. But it’s proceeding as, from a utilization perspective and traffic perspective, as we had planned.

Kevin Copeland – Cowen & Company

Okay. Thanks. I appreciate it.

Operator

Thank you. Our next question is from Peter Stabler of Wells Fargo Securities. Your line is open.

Ignatius Njoku – Wells Fargo Securities

Hi, this is Ignatius Njoku for Peter. Just one quick one. Can you talk about or comment about your competitive environment and what you’re seeing? And secondly, can you talk about your international operations? Western Europe and other parts of the world? Thank you.

Anthony Vuolo

Sure. From a competitive perspective, we don’t see any new competitors in the marketplace than we’ve seen in the past. From a pharma perspective, we’re really kind of like working our way through many of our customers reducing their overall marketing budgets given some of the issues that they’re trying to manage as a result of their own pressures on margins primarily because of what they’re facing from a patent expiration perspective.

But there have been no new competitors either on the consumer or professional side that we’ve seen. In the CPG environment, there’s been increased competition from some of the social networking sites and ad networks. And the value proposition that we offer that those channels can’t offer is the quality of the audience. So in our audience – when people are on WebMD, they’re engaged in their health, they’re engaged in researching a particular condition and that’s the most opportune time for an advertiser to reach someone.

When they’re actually engaged in a topic as opposed to when they’re in other places not engaged in their health and trying to reach them and divert them from whatever they want to go do. Whether it was at a discussion in a community or go check the weather on the site. So that’s our advantage and obviously that advantage is most relevant to products that have some health orientation to them and that’s where our focus is.

Ignatius Njoku – Wells Fargo Securities

Thank you.

Operator

Thank you. Our next question is from Mark May of Barclays. Your line is open.

Mark May – Barclays

Yeah, hi. Can you just break out the growth at WebMD and Medscape for us? Or maybe just more generally, did one outpace the other in the quarter?

Anthony Vuolo

I think the traffic growth across both the consumer and professional sites, it was consistent across both properties.

Mark May – Barclays

Okay. Great. Thank you.

Operator

Thank you. Our next question is from Ryan Daniels with William Blair. Your line is open.

Andrew O’Hara – William Blair

Hey, guys. It’s Andy O’Hara in for Ryan today. Related to your comments a minute ago about competition, we’ve been hearing that advertisers are increasingly unable to reach their target audience without relying on the contextual relevancy alone with technology allowing them to get this audience at a scale from aggregation of other sites. Can you talk about that at all and if that’s impacting your rates?

Anthony Vuolo

Sure. That really has the most impact on the CPG side of our business as I mentioned before where advertisers can reach audiences who may have viewed some content on another site that they view relevant and they follow them across the Web. And as I said on the CPG side, although – that’s where that competition’s most relevant is that our value proposition to an advertiser is really focused on getting their message in front of someone while they’re engaged in managing their health or their condition as opposed to when they’re off doing something else. And that’s how we distinguish ourselves between – from the other ad networks. And that’s where we’ll continue to focus.

On the pharma side, I’ve seen less impact from that type of inventory given the concerns that many of our pharma clients have over either adjacency – they want to understand where their ads are being placed, what sites, what content they’re being displayed next to – and then from a social perspective, given the lack of clarity around the whole social media environment as it relates to pharmaceutical advertisers and the potential for their ads to be displayed adjacent to an off-label use of the drug, we haven’t seen the same level of competition in that marketplace.

Andrew O’Hara – William Blair

Great, that’s helpful. And then can you talk a little bit more about the other revenue streams you guys are evaluating beyond pharma and CPG, thanks?

Martin Wygod

Sure, it’s Marty here. We’re really looking at all the revenue streams in the healthcare environment especially now as there’s so much change going place – taking on in healthcare at this point. For obvious reasons we can’t get into the specific areas but any of the other companies that are in other areas of healthcare that really need the reach because they don’t have it to either the consumer or to the physician base or a combination to both, that don’t have the kind of audience we have but have to reach that kind of audience are either coming to us or we are going to them. And we are seeing the potential here of substantial incremental revenue streams coming from those sources. I don’t mean to sound vague but no reason to give out the specific areas but we will be putting that out on our next quarterly report to give you a better understanding after we first the first mover advantage here.

Andrew O’Hara – William Blair

Thanks a lot, guys.

Operator

Thank you. Our next question is from Gerard Heymann of JP Morgan, your line is open.

Gerard Heymann – JP Morgan

Thank you, I have two questions. The first is can somebody give me a breakdown of what the percentage of our revenues are from CPG and pharma, and I have a second follow-up question?

Anthony Vuolo

In terms of the breakdown of the revenue sources, it can vary greatly from quarter-to-quarter which is why we typically don’t disclose that. But primarily if you look at it we’re primarily getting the substantial amount of our – majority of our revenues from pharma.

Gerard Heymann – JP Morgan

Okay, thanks. And secondly in regard to Europe and, say, Boots PLC among others can you comment on any of the growth opportunities that we’re experiencing or what we may be looking on the future?

Anthony Vuolo

International continues to be an area of investment for us. The Boots model from – in terms of building a website in international market from a consumer perspective has worked well. We’ve been able to marry our expertise in terms of generating meaningful, incredible health and wellness content with an entity in Boots who has a significant physical footprint and the ability to provide us some marketing distribution.

And we now have enough traffic there that we’re approaching advertisers with the inventory. In that particular market in the U.K., the opportunity is more the CPG opportunity than it is a pharma opportunity. Pharma companies can do a certain amount of patient education on a condition but they can’t do direct-to-consumer advertising on a product. On the Professional side, we’ve approached the international opportunity by first putting sales people in Western Europe and selling the international reach that exists on Medscape to the global part of pharma companies.

That’s gone well and we continue to increase our sales force there. And now as we mentioned in the past and on this call, now we’re starting to develop foreign language versions of Medscape for the audiences that we can’t reach through Medscape directly on the English language sites. So we’re excited about that opportunity. And most countries, particularly in Western Europe, you can market pharmaceuticals to physicians and so we’re taking our learnings and expertise that we’ve developed here and starting to deploy those in other countries.

Gerard Heymann – JP Morgan

Thank you very much.

Operator

Thank you. Our next question is from Scott Kessler of S&P Capital IQ. Your line is open.

Scott Kessler – S&P Capital IQ

Hi. Thanks a lot. A few questions. I guess the first and most obvious one is that if you look at your gross cash and investments, you guys had $1.1 billion and that’s roughly the company’s current market cap. So can you talk a little bit about future uses of cash to create or add value? And I have a follow-up. Thanks.

Martin Wygod

As we’ve said in the past and what we said today we’re looking at some additional acquisitions that have come on the market now that were not available over the last nine months. We are looking at different ways to deploy this money that makes sense. The Board is always, on a continual basis, renewing the alternative uses of this cash, whether it may be reduction of number of shares outstanding, et cetera. And now we’re in obviously an advantageous position from a balance sheet perspective and sitting with all this available cash at this point with a relatively low valuation of our company.

Scott Kessler – S&P Capital IQ

Okay. And would you say that there’s a greater level of let’s say interest in doing something sooner rather than later or whether it’s because of the opportunities that you referenced or the favorable balance sheet, or valuation construct that you find yourselves having?

Anthony Vuolo

I don’t know if the Board is thinking of doing anything any sooner than later in relation to that. You know the Board is very focused on bringing in the new CEO as well as our bringing in additional incremental management, and seeing the directions we want to take from an acquisition perspective, et cetera. So I don’t feel that you can assume anything else is going to take place at this time.

Scott Kessler – S&P Capital IQ

Okay. And my follow-up involves whether you’ve seen any impact from the symptoms search functionality that Google launched I think in February?

Martin Wygod

It’s something that we monitor closely, and it’s been neutral to our traffic at this point. You know that symptom functionality, the fact that we put some more refined links below the search term, and we generally rank highly even in the more refined search terms in the algorithmic results. So it hasn’t had either a positive or negative impact on our traffic to date.

Scott Kessler – S&P Capital IQ

Okay. Thanks a lot.

Operator

Thank you. And our next question is from Andrew Schlussel, private investor. Your line is open.

Unidentified Analyst

Thank you. My question was asked.

Anthony Vuolo

Thank you.

Operator

Thank you. And our last question is from Steve Rubis of Stifel Nicolaus. Your line is open.

Steve Rubis – Stifel Nicolaus

Hey, thanks for taking my follow-up. Tony, in your prepared remarks, you suggested that WebMD seems focused on the launch of new drugs as the driver of a turnaround. What are you doing to accelerate your share of the secular shift from offline to online channels? And then can you provide any details around where online penetration stands. Is it still below 5%? And how do you view your total addressable market size currently?

Anthony Vuolo

Well, you know, let’s take them one at a time. Firstly, in terms of the shift from offline to online, as I mentioned in my prepared remarks, we continue to be in dialog with all of our clients around the value of digital marketing programs, particularly on WebMD. And that’s what we’re focused on in terms of our efforts around incorporating more data and analytics into the product offering. Because with that improved level of data and analytics, should come additional allocation out of the overall budgets.

So that’s an important initiative for us. In terms of the, it’s an imprecise number, but in terms of the percentage of marketing spend that pharmaceutical companies spend online, I believe that it is overall less than 5% of their total marketing spend, when you include on the consumer side television and print, and on the professional side the cost of sending sales reps into positions and all the other types of off-line marketing that they do. So that’s our best understanding in terms of the marketing penetration from that perspective.

Martin Wygod

I think it’s our job to convince pharma that we are really a meaningful part of the solution of their current challenges from a cross-part point of view and from an ROI perspective. And with more and more of the blockbusters going off of patents and more and more 300 to $1 billion drugs coming on the market over the next two, three years, I think we’re in the right position at the right time and I believe we will convince them on the value of what we bring to the table.

Steve Rubis – Stifel Nicolaus

Thanks.

Operator

Thank you. This concludes the Q&A session. As a reminder, if necessary, there is a replay available of this call which can be accessed toll free at 855-859-2056 or if you are calling outside the U.S. at 404-537-3406. The passcode is 70931224. There’s also a webcast replay available on www.wbmd.com. Thank you for joining us today.

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