WebMD Health Corp. Q4 2007 Earnings Call Transcript

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 |  About: WebMD Health Corp (WBMD)
by: SA Transcripts

WebMD Health Corp. (NASDAQ:WBMD)

Q4 FY07 Earnings Call

February 21, 2008, 04:45 PM ET

Executives

Risa Fisher - VP of IR

Martin J. Wygod - Chairman and Acting CEO of HLTH Corporation

Mark D. Funston - EVP and CFO of WebMD

Wayne T. Gattinella - CEO, President of WebMD Health

Anthony Vuolo - COO

Analysts

Terry Heath - Credit Suisse

Jennifer Watson - Goldman Sachs

Mark Mahoney - Citigroup

James Kumpel - FBR Capital Markets

Rob Kelly - Smith Barney

William Morrison - ThinkEquity Partners

Alexander Sandy Draper - Raymond James

Anthony Petrone - Maxim Group

Brian Pitz - Banc of America Securities

John Kelly - Citigroup

George Askew - Stifel Nicolaus

Jeremy Lopez - William Blair & Company

Heath Terry - Credit Suisse

Corey Tobin - William Blair & Company

Operator

Good afternoon and welcome to HLTH Corporation's and WebMD Health Corp's December 2007 Quarterly Conference Call. Today's conference is being recorded.

I will now turn the conference over to Risa Fisher, Vice President of Investor Relations. Ma'am you may begin.

Risa Fisher - Vice President of Investor Relations

Good afternoon. This is a joint conference call to discuss HLTH and WebMD's fourth quarter and financial results and to discuss the proposed merger transaction between HLTH and WebMD announced earlier today.

I will read the following statements concerning forward-looking disclosures. All statements made today other than statements of historical facts are forward-looking statements, including those regarding our guidance on future financial results and other projections or measures of HLTH and WebMD's future performance, our expectations concerning the growth of our online marketing budget, other market opportunities, and their ability to capitalize on them, the benefits expected from acquisitions and other transactions from new products and services, and from other potential sources of additional revenue. The merger transaction between HLTH and WebMD which was announced earlier today and the benefits expected from that transaction, and the potential sales transaction with respect to ViPS and Porex.

These statements speak only as of today and are based on our current plans and expectations, and they involve risks and uncertainties that could cause actual future events or results to be different from those described, including the risks and uncertainties that are described in HLTH and WebMD's SEC filings. Except as required by law, HLTH and WebMD do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances.

The earnings release issued today by HLTH is available at www.hlth.com, in the Investor Relations section and has also being included in the Form 8-K filed today with the SEC. The earnings release issued today by WebMD is available at www.wbmd.com in the Investor Relations section and has also been included in the Form 8-K filed today with the SEC. The respective Form 8-Ks and other SEC filing are also available on HLTH and WebMD's respective websites and on the SEC's website. The releases in Form 8-K that were filed today include reconciliations between GAAP and non-GAAP financial measures to be presented in this call.

The statements made in this call do not constitute an offer of securities for sale. In connection with the proposed merger HLTH and WebMD expect to file with the SEC a proxy statement prospectus as part of a registration statement regarding a proposed transaction. Investors and security holders are urged to read the proxy statement prospectus, because it will contain important information about HLTH and WebMD and the proposed transaction. Investors and security holders may obtain a free copy of the definitive proxy statement prospectus and other documents once filed by HLTH and WebMD with the SEC at www.SEC.gov or www.hlth.com or www.wbmd.com.

Investors and security holders are urged to read the proxy statements prospectus and other relevant material when they become available before making any voting or investment decisions with respect to the merger.

I would now like to turn the call over to Martin Wygod, Chairman and Acting CEO of HLTH Corporation.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Thanks Risa. Good afternoon and thank you for joining us today. Joining me on the call today are Wayne Gattinella, CEO and President of WebMD; Mark Funston, CFO of HLTH and WebMD, as well as Tony Vuolo, Chief Operating Officer of WebMD.

HLTH and WebMD announced today that they have entered into a definitive merger agreement pursuant to which HLTH will merge into WebMD. In the merger, each outstanding share of HLTH common stock will be converted into 0.1979 shares of WebMD common stock and $6.89 in cash subject to certain possible adjustments. The shares of WebMD Class A common stock currently outstanding will remain outstanding and will be unchanged in the merger.

The merger will eliminate both the controlling sets of WebMD stock held by HLTH and WebMD's existing dual cash stock structure. I believe that this merger achieves the objectives for both companies that we established at the outset of this process quite a few months ago. WebMD will achieve a 20% reduction in its outstanding shares, assuming no conversion of the convertible debentures and eliminate HLTH's controlling interest and after the merger WebMD expects to have approximately $700 million in cash on investments. WebMD will be well positioned to pursue future opportunities.

The merger reflects a premium to HLTH shareholders of 26% for their shares based upon the estimated closing prices and HLTH holders will receive a direct ownership interest in WebMD. The health shareholders will own approximately 80% of WebMD after the completion of the merger based on the currently outstanding shares of HLTH and WebMD.

Plus we will be divesting its ViPS and Porex businesses, we have received significant interest from potential strategic buyers for both ViPS and Porex and we'll be moving very rapidly to obtain formal losses for these businesses. These divestitures are not dependent on the merger and do not require stockholder approval.

The cash portion of the merger consideration will come from cash and investments at WebMD and HLTH and proceeds from the anticipated sales at ViPS and Porex. After the close of the merger and the divestitures of ViPS and Porex it is expected that WebMD will continue to benefit from significant remaining federal net operating loss carry forwards in the range of $500 million to $600 million.

The cash portion of the merger consideration is subject to downward adjustment prior to closing based on the amount of proceeds received from the disposition of HLTH's investment in certain auction rate securities, which will be liquidated by health prior to the closing of the merger under the terms of the merger agreement.

As Mark Funston will discuss in a few moments, HLTH has approximately $364 million of investments in certain auction rate securities, approximately $169 million which are owned by WebMD. The types of auction rate securities investments that HLTH owns are backed by student loans, 97% of which are guaranteed under the Federal Family Educational Loan Program or known as FFELP. Additionally, if either ViPS or Porex has not been sold at the time of the HLTH WebMD merger, it is ready to be consummated, WebMD can issue up to 250 million redeemable notes to the HLTH stockholders in lieu of the portion of the cash consideration otherwise payable in the merger.

The notes would have an interest rate of 11% payable in kind, annually in arrears. The notes will be subject to mandatory redemption by WebMD from the proceeds of the divestitures in remaining ViPS and Porex businesses.

Based on the number of shares outstanding today at HLTH and WebMD, there will be approximately 45 million shares of WebMD common stock outstanding following the close of the merger which is a reduction of approximately 20% of the 57 million in change WebMD shares that are currently outstanding. We estimate that WebMD will have approximately $700 million in available cash and investments after the sale of Porex and ViPS, and the payments of the cash consideration in the merger. The number of shares outstanding following the merger and the amounts of cash remaining at the payment of the cash consideration both reflect the assumption that the existing HLTH convertible notes remain outstanding after the merger.

Senior management team of WebMD will continue to lead the organization under Wayne Gattinella and after a period of transition we do not expect that WebMD will incur substantial incremental expenses as a result of the merger other than non-cash expenses. We expect this merger to close -- will close in the latter part of the second quarter or the third quarter.

I would like to turn it over to Mark Funston and then of course to Wayne to review the fourth quarter financial and operating results respectively, and then we will take questions at the end of their respective presentations. Thank you.

Mark D. Funston - Executive Vice President and Chief Financial Officer of WebMD

Thank you, Marty. Please note that HLTH's and WebMD's prior period results reflect the impacts of the change in the prior year's income tax provision related to the accounting treatment of tax deductible goodwill amortization, which we discussed on our prior conference calls this year. This change resulted in an increase in non-cash deferred income tax expense in prior periods. WebMD and HLTH filed amended Form 10-Q and 10-K on May 10, 2007 which contains those revised prior period results.

Both companies results also reflect the sale on WebMD's offline professional medical reference and textbook publication business which we sold on December 31, 2007. This business which is now reflected as a discontinued operation and WebMD's and HLTH's financial statements generated revenue of approximately $1 million and $4 million for the fourth quarter and full year 2007, respectively with minimal impact to adjusted EBITDA or net income for either the quarter or the year.

I will now review WebMD's fourth quarter results. WebMD revenue for the December 2007 quarter was $96.6 million compared to $79.4 million last year, an increase of 22%. Revenue growth was 21% over the prior year and excluding acquisition-related revenues of $3.2 million for the December 2007 quarter and $563,000 in the December 2006 quarter, $400,000 at offline CME revenue in the December 2006 quarter and the impact of the AOL expiration on April 30, 2007 which contributed no revenue in the December 2007 quarter and $1.5 million in the December 2006 quarter.

Adjusted EBITDA for the December 2007 quarter was $33.1 million compared to $22.4 million last year, an increase of 48%. Adjusted EBITDA as a percent of revenue improved 600 basis points to 34.2% from 28.2% last year. Adjusted EBITDA per diluted share was $0.55 compared to $0.38 last year. The adjusted EBITDA margin on incremental revenue was over 60% from the December 2007 quarter. Excluding the impact on revenue and adjusted EBITDA from acquisitions the expired AOL arrangements, and the discontinued offline CME products discussed earlier, the adjusted EBITDA margin and incremental revenue was over 65% for the December 2007 quarter.

Online services segment adjusted EBITDA increased 39% to $31.6 million or 34.3% of segment revenue compared to $22.7 million or 29.9% of segment revenue last year.

Publishing and other services adjusted EBITDA was $1.5 million compared to a loss of $321,000 last year. As I mentioned effective December 31, 2007, WebMD sold its offline professional medical reference and textbook publication business. This business is reflected as a discontinued operation in the company's financial statement.

Income from continuing operations was $45.1 million or $0.75 per share for the quarter compared to $6 million or $0.10 per share last year. Net income for the quarter was $48.3 million or $0.81 per share compared to $6 million or $0.10 per share last year. Income from continuing operations and net income for the fourth quarter include a benefit of $24.7 million or $0.41 per share relating to certain reversals of portion of deferred income tax valuation allowances. This reversal reflects an estimate of the portion of the deferred tax assets that are expected to be realized through operations in 2008.

Looking further at the revenue increase of 22%, advertising and sponsorship revenue increased 21% to $70.4 million excluding the impact of the expired AOL agreement which contributed $1.5 million in the December 2006 quarter and no revenue in the December 2007 quarter. Advertising and sponsorship revenue increased 24% compared to last year.

Private portal licensing revenue increased 25% to $21.6 million resulting from both internal growth and from our acquisition of Subimo which contributed $3.2 million during the quarter... this quarter and $563,000 last year. After adjusting for these revenues licensing revenues increased 9% compared to last year.

Publishing and other revenue was $4.3 million, an increase of $1 million compared to last year. Revenue from discontinued offline CME products contributed $400,000 in the prior year and no revenue in the current period. The income tax benefit for the fourth quarter is $21.9 million which includes a $24.7 million benefit relating to reversal of a portion of WebMD's deferred income tax valuation allowances. This reversal reflects an estimate of the portion of WebMD's deferred tax assets that are expected to be realize through operations in 2008.

Income from discontinued operations includes a net gain of $3.6 million from sale of WebMD's offline professional medical reference and textbook publication business. WebMD's weighted average diluted share count for the quarter was 59.7 million shares.

Operating cash flow from continuing operation was $15.1 million for December 2007 quarter compared to $9.5 million last year. Operating cash flow from continuing operations for the full year 2007 was $87.9 million compared to $52.5 million last year, representing strong conversion of adjusted EBITDA into operating cash flows.

As we have stated on prior calls, quarterly operating cash flows can be impacted by the timing of the cut off compensation accruals, other expense accruals, the billing and collection of receivables, and reimbursements to HLTH in relation to the quarters end. Capital expenditures were $4.5 million and $18.1 million for the December quarter and full year 2007 respectively.

As of today, WebMD has a total of approximately $327 million in consolidated cash, cash equivalents, and marketable securities, which includes approximately $169 million of investments in certain auction rate securities. The types of auction rate securities investments that WebMD owns are backed by student loans, 97% of which are guaranteed under the Federal Family Education Loan Program and all had AAA credit ratings when purchased. WebMD did not own any other type of auction rate securities investments.

The interest rates on these auction rate securities are reset every 28 days by an auction process. Historically, these types of investments have been highly liquid. Last week auction rate securities investments backed by students loans failed including auctions for auction rate securities investment held by WebMD. The result of a failed auction is that these auction rate securities continue to pay interest in accordance with their terms until the next successful auction.

However, liquidity will be limited until there is a successful auction or until such time as other markets for these auction rate securities investments develop. WebMD believes that the underlying credit quality of the assets backing its auction rate securities investments have not been impacted by the reduced liquidity of these auction rate securities investments.

As a result of these recent events, WebMD is in the process of evaluating the extent of any impairment in its auction rates securities investments resulting from the current lack of liquidity. However WebMD is not yet able to quantify the amount of any such impairment. WebMD believes that any lack of liquidity relating to its auction rate securities investment will not having an impact on its ability to fund its operations.

Turning now to HLTH's consolidated financial results. Consolidated revenue for the December 2007 quarter was $145.8 million. Adjusted EBITDA was $40.3 million or $0.17 per share in the December 2007 quarter. Income from continuing operations in the December 2007 quarter was $41.5 million or $0.19 per share and net income for December quarter was $43.1 million or $0.20 per share.

As a reminder, when the comparing results for the current quarter and year versus the prior year periods, please consider that for the current quarter and current year our 48% portion of Emdeon Business Services income is reflected in the line item equity and earnings of EBS Master LLC, whereas for the prior year periods the result of Emdeon Business Services were included in our consolidated revenue and earnings through the date of the EBS sale on November 16, 2006. Because of this required presentation, our reporting regarding EBS as well as our consolidated results is not comparable to the respective prior year period.

As previously disclosed, HLTH completed the sale for $575 million in cash of its 48% minority interest in Emdeon Business Services on February 11, 2008. HLTH expects to recognize a taxable gain on this transaction and expects to utilize a portion of its federal NOL carry forward to offset a portion of the tax liability that would otherwise result from the sale. In addition to HLTH's 84% ownership of WebMD, HLTH has two other wholly-owned subsidiaries. As Marty mentioned earlier, we are engaged in a process to divest these businesses.

Looking at ViPS and Porex results for the quarter, ViPS segment revenue was $26.2 million for the quarter compared to $25.3 million a year ago, an increase of 3% primarily reflecting an increase in consulting services provided. ViPS segment adjusted EBITDA was $6.3 million versus $5 million in the prior year, an increase of 25% compared to a year ago. Operating margins increased to 23.9% from 19.8% last year as a result of revenue mix and reduced G&A expenses, including reduced facilities cost which were renegotiated during 2007.

Porex segment revenue was $23 million for the quarter compared to $21.2 million a year ago, an increase of 9% driven primarily by growth in surgical products combined with the impact of favorable foreign currency exchange rates. Porex segment adjusted EBITDA was $6.8 million versus $6.2 million in the prior year, an increase of 9%. Operating margins increased to 29.6% and 29.5% in the year ago period.

HLTH corporate expense for the December 2007 quarter was $5.8 million or approximately 4% of consolidated revenues, compared to $9.8 million a year ago. As we noted in past quarters we are providing certain transition services to EBS Master LLC and Sage. The fees we received for these services in December 2007 quarter were approximately $900,000 compared to $2.2 million a year ago and are included within the corporate segment as an offset to the cost that's providing the related services.

Net interest income for the quarter was $11.4 million compared to $16.9 million in the fourth quarter of the prior year. The decrease in interest income is primarily due to lower cash balances in the current year as a result of cash utilized in the December 2006 tender offer.

Income tax benefit for the fourth quarter includes a $23.7 million benefit relating to the reversal of a portion of HLTH deferred income tax valuation allowance. This reversal which is primarily related to the WebMD business reflects an estimate of the portion of our deferred tax assets that are expected to be realized through operations in 2008.

As discussed earlier, income from discontinued operations for the December quarter includes a net gain of $3.6 million related to the sale of WebMD's offline professional medical reference in textbook business. Also included in discontinued operations during the quarter is a charge of $15.6 million reflecting an increase in the estimate of HLTH's indemnification obligation from the defense cost of the nine former officers and directors of HLTH's former subsidiary Emdeon Practice Services Inc. and who are guided in connection with the previously disclosed investigation by the United States Attorney for the District of South Carolina. This charge was almost fully offset by a benefit of $14.6 million related to settlements we reached with two of the insurance companies associated with this matter. The $14.6 million of proceeds related to these settlements will receive subsequent year and therefore included on our December 31, 2007 balance sheet as a receivable within prepaid expenses and other current assets.

HLTH's operating cash flow from continuing operations in the December 2007 quarter was $37 million consistent with the prior year. The December 2007 quarter reflects higher cash flow from our operating segments and reduced corporate expenses offset by lower interest income when compared to the prior year period and a decrease over the prior year period and cash flow from EBS due to EBS being treated as an equity investment since mid November 2006. While we share 48% of EBS earnings we did not receive cash distributions from this investment during the quarter.

HLTH's operating cash flow from continuing operations for the full year 2007 was $93.6 million compared to $172.7 million in the prior year. HLTH's capital expenditures for the December 2007 quarter were $5.6 million, cash flows during the December 2007 quarter include a receipt of approximately $19 million from exercises of stock option of which approximately $6 million related to WebMD stock option.

HLTH currently has a total of approximately $1.45 billion in consolidated cash, cash equivalents, and marketable securities which includes approximately $364 million of investments and certain auction rate securities. WebMD holds $327 million of HLTH's current cash amount, cash equivalents, and marketable securities including $169 million of HLTH's consolidated auction rate securities investments.

As I discussed with WebMD, the types of auction rate securities investments that HLTH owns are backed by student loans, 97% of which are guaranteed under the Federal Family Education Loan Program and all had a AAA credit rating when purchased. HLTH and its subsidiaries do not own any other type of auction rate securities investments.

HLTH is in the process of evaluating the extent of an impairment in its auction rate securities investments resulting from the current lack of liquidity, however, HLTH has not yet able to quantify the amount of any impairment. As Marty mentioned in connection with the proposed merger transaction between HLTH and WebMD announced today, HLTH has agreed to sell its investments in auction rate securities other than those held by WebMD, prior to the closing of that transaction. HLTH believes that any lack of liquidity relating to its auction rate securities investments will not have an impact on its ability to fund its operations.

Turning to guidance, as a result of the anticipated changes to the corporate structure as described by Marty earlier, we will not be providing 2008 guidance for HLTH at this time. We provided detailed quarterly financial guidance for WebMD on February 11, 2008. Rather than taking the time now, to walk you through that schedule we will field to your specific questions when we open up the call for Q&A.

I would now like to turn it over to Wayne to discuss WebMD's operating results in more detail.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Thank you, Mark. WebMD's fourth quarter operating results demonstrate the strong progress that we have continued to make towards delivering on the company's overall strategic plan. We continue to build our leadership position as the most recognized brand of health information in the marketplace. WebMD was recently recognized by Time as one of the 25 sites we can't live without recognized by Forbes as best of the web for health information, recognized by Trustee as one of the top 20 most trusted companies on the web, and recognized by the more than 100 million unique users a year who rely on WebMD as their source of health information. The milestones are hard to ignore. On an annual basis WebMD now reaches one in every two U.S. adults, three out of every four women, and 95% of all adults seeking health information online.

During the fourth quarter, traffic to the WebMD Health Network averaged 44.8 million unique users per month. A growth rate of 26% from a year ago, while page views during the quarter totaled 968 million pages, a growth rate of 19% from a year ago. Excluding AOL Health traffic from the prior year quarter, our unique user and page view growth increased to 32% and 22% respectively. 97% of our page view traffic in the fourth quarter was generated on established HLTH destination sites that are owned and operated by WebMD, and where WebMD is in full control of the programming, marketing and editorial content.

Our reach to physicians also expanded during the quarter as we averaged nearly $1.5 million monthly physician visits to our professional network. Online continuing medical education completed on our professional sites grew to 936,000 programs, an increase of 50% over the prior year. The total number of CME programs completed on our professional sites during 2007 reached 3.1 million programs for the year, an increase of 1 million CME programs over 2006.

We are also making significant progress towards achieving the full benefits of our new portal technology platform since launching our new WebMD.com site one year ago. First, we've significantly increased our search engine optimization and the ability for WebMD articles to rank highly in the natural search results on Google, Yahoo, and others. Our non-paid search referral traffic to WebMD has increase nearly 50% from a year ago, and WebMD content now ranks on the first page of Google and Yahoo's search results on more then 200 of the 400 most frequently searched health terms.

Second, we've significantly improved the user experience and measurable engagement on WebMD.com. Over the past year the click-through rate from the WebMD home page has increased by 47%. The click-through rate on the WebMD search results page has increased by 60% and utilization of our enhanced symptom and health assessment tools has more than doubled.

Third, we've significantly increased utilization in the key areas of our site that we monetize the most. Traffic in key disease and condition areas has grown twice as fast as the overall site, and traffic in prime health and wellness areas has increased more than four times faster than the overall site. End user engagement with our new health video content over the past year has increased three fold. We have an important set of new product applications launching this year that are designed to further increase the efficient flow of new users as well as enhanced our engagement once they reach our sites.

Finally during the fourth quarter, we partnered with Medcenter to expand the Medscape brand of online health information for physicians through 11 Spanish and Portuguese speaking countries, including Spain, Mexico, and Brazil. Early results are very encouraging as we have already attracted several pharmaceutical sponsors to our emerging physician network. We are continuing to evaluate options for entering other international markets at this time.

Turning to the private portals market, the base of large employers and health plans that license WebMD's health and benefits portal platform expanded in the fourth quarter to now include Blue Cross and Blue Shield of Minnesota, National Association of Letter Carriers and Special Agents, Mutual Benefit Association, and in addition we implemented our integrated health portal and coaching platform for Blue Shield of California, ConnectiCare and Liebert Corporation.

At the end of the fourth quarter, the installed base of large companies licensing the WebMD private portal platform totaled 117 organization compared to 99 a year ago. We also have approximately 140 additional customers who purchase our standalone health decision support services.

While we continue to increase our base of core private portal customers, our latest guidance reflects both the rise of increasing competition in this segment, as well as a more cautious business environment and its potential impact on the purchase decisions of large employers for the balance of this year. Also in the fourth quarter IBM began utilizing our new WebMD Health alerts products application, which integrates with the WebMD personal health record to securely message consumers on potentials gaps in their care. IBM has recently reported that more than 80% of their employees now have personal health data entered into their WebMD powered personal health record.

So, in closing, I am very excited and confident in our growth outlook for the future. WebMD is ideally situated to capitalize on the shift to web-based marketing and education as our key biopharma and consumer products clients face declining returns on the traditional approaches to product marketing.

WebMD is by far the most pervasive brand of health information today. And with our significant reach to both consumers and physicians, we are uniquely positioned to deliver the full spectrum of digital solutions that the market place is steadily evolving towards.

Importantly, we have the largest and most experienced team of over 1,000 talented and highly motivated individuals who are fully focused on fulfilling our promise that better information does lead to better health for everyone.

Now, operator, at this time we would like to open it up for question.

Question And Answer

Operator

[Operator Instructions]. Our first question comes from Heath Terry from Credit Suisse.

Terry Heath - Credit Suisse

Great. We appreciate it if you could take some time to kind of go into what you're seeing among your advertisers in terms of time to market, how long it's taking them to get their advertisements approved, and obviously talking about your pharmaceutical advertisers, and what your expectations are for this lengthening or potentially shortening over time and what kind of expectations you have got with that in your guidance for this year?

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Yes there is a process by which BioPharma goes through a legal approval of any public advertising that they refer to as medical legal review. It's pretty thorough, and it does, in fact, create a cycle time between a sale and a program that we execute in, and that cycle time is built in to our models. Last year roughly in the third quarter we introduced a new set of services that were much more highly personalized, somewhat more complex in terms of the content that they provide. And the consequence was as we had experienced that medical legal review time for those particular services, was longer than we had anticipated and built into... in to serve our core products. That cycle time for those services is now built into our 2008 guidance. So as I reflect on the time for approval for newly sold programs to go live it really doesn't differ from the experience now that we saw 2007. And again with respect to how we have guided our revenue and sales volume through 2008, we've anticipated whatever particular cycle times those programs have.

Operator

Our next question comes from Jennifer Watson from Goldman Sachs.

Jennifer Watson - Goldman Sachs

Hi, thank you. Can you discuss any changes that you have seen with the search functionality since you switched over to Yahoo! from Google in terms of monetization, clicks to rates and how users are reacting to the change?

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Just generally speaking as we moved towards Yahoo!'s natural search results or sponsored search results on our WebMD sponsor page we've had very good results. That's a long-term relationship that we struck with Google and implemented in early for the quarter, from a user experience standpoint, from a performance standpoint we're very happy with the results that we have achieved. And both companies have been working closely together to continue to optimize these results as we continue.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

And I think you meant with Yahoo! Wayne.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Yes, sorry, with Yahoo!'s search results this particular quarter.

Operator

Our next question comes from Mark Mahoney from Citigroup.

Mark Mahoney - Citigroup

Great, thank you. I guess two quick questions. First, why do you need to liquidate, why would you want to liquidate ARS? Just prior to this transaction if there is a challenge in the market, maybe it's better to hold off. And then secondly, Wayne, could you just give a little bit more color on some of the economic sensitivity you are seeing amongst customers in terms of the private portal businesses, is that willingness to commit only smaller amounts, is that unwillingness to commit to amounts at this time but perhaps just the timing issue in late during the year any more color on that would be great. Thank you.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

In relation to your first question, this is the terms that we negotiated on the merger, and we think that will give us ample time to be able to liquidate those securities and provide the necessary cash for the WebMD and the combined company.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

In the second question, in terms of the private portals market, we've gotten more cautious as we created our outlook for 2008 particularly in the large employer markets, as it's our concern as there is many of the companies who were targeting are going through their own cut backs or constriction, it's the kind of programs that we offer that potentially could be on the cut list. Right now as we look at our sales activity there is lot of activity in the marketplace. But again as we have experienced that a slowdown in the growth rate in that market some of it caused by new competition, but we believe other aspects... just due to a slowing of the decision process that we've anticipated the potential for that decision process to kind of remain sluggish through 2008.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

We are also seeing stronger competition from disease management companies and payers in this arena.

Operator

Our next question comes from James Kumpel from FBR Capital Markets.

James Kumpel - FBR Capital Markets

Hi, good afternoon guys. As it relates to the deal, can you just highlight for us that the converts are going to be on your balance sheet Wayne? And that if you could qualify the level of NOLs that you still have at your disposal post merger?

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Maybe I will handle that question Wayne, if it's okay. We will have approximately give or take $50 million either way or $500 million of NOLs available at the WebMD level we will be sitting with $700 million and some odd million in cash. And if the converts have not converted we will be sitting with $350 million of one of the converts and $300 million of the other... one in three quarter, the other one at three and make convertible debenture. Does that answer your question or -- Jim?

James Kumpel - FBR Capital Markets

All right. Do you anticipate that the converts in fact will convert or do you anticipate that, that's going to get on to the balance sheet?

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

We don't know for sure, it's really up to the convert holder. But it's really hard to say at this point, and we are not sure if they will or they won't.

James Kumpel - FBR Capital Markets

Okay. Thank you.

Operator

Our next question comes from Rob Kelly from Smith Barney.

Rob Kelly - Smith Barney

I have seen releases from Revolution Health and Everyday Health reporting to have surpassed WebMD as a number one and fastest growing health property on the Internet. Can you explain the difference between those two businesses and WebMD and the competitive advantage that WebMD has if any?

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Sure I will take that. While these new start-ups Everyday Health, Revolution Health are attempting to position themselves as health content and destination sites. In fact, they are really operating as ad networks, that is there are loose collection of diet, fitness, self health, commerce type sites that, that they don't own, they don't operate but in fact merely have sales agreements to ramp their inventory. And so, you are right while they are comparing their aggregated traffic to WebMD or other legitimate health destination sites like Mayo Clinic. The reality is they should be comparing themselves to other ad networks like ad.com or Tribal Fusion or others who re-market other peoples' low end inventory.

Good example is one of those two companies announced some traffic statistics for January whereas... wherein two-thirds of the traffic that they claimed actually came from a single user generated diet chat site that company doesn't even own and that pharma wont even advertise on. Large customers are smart, they understand the difference in the quality of our network and the quality of our audience and in the unique value that we can deliver for them. And just think it's... as we continue to point out it's very important that when we do comparisons, that's a truly apples-to-apples in terms of the quality of those things. And again, the good thing is that their customers do understand the difference.

Operator

Our next question comes from William Morrison from ThinkEquity.

William Morrison - ThinkEquity Partners

Hi, thanks. I want to see if you could I guess... just maybe give a little qualitative commentary around your guidance. This is the second quarter in a row you've had to lower your guidance and suggesting that visibility is limited. And it looks like looking at your quarterly guidance for WebMD, it's pretty back end weighted. Deferred revenue is down sequentially and flat year-over-year. So I was just wondering if you could comment on how confident you are in the full year guidance and any kind of commentary around that will be helpful? Thanks.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

You pointed out we moved our revenue outlook down by about 5% just a month ago. When we looked out into the marketplace through the year, we saw a couple of things that happened towards to the back end of January. One is that there were two significant pharma products that literally have been taken off the market. One, due to a premature conversion to generic, and the other they had some clinical issues for a product that had already been launched. And consequently the company has pulled the marketing on that product. It was unusual to experience two products of that size and magnitude that early in the year or at least we hadn't seen that before. And it impacted both embedded business that we had been marketing and contracted the market throughout '08 and it also impacted the potential that we did establish to generate more business on those products.

And then as we commented on, as we looked at the private portals market and the slowing growth rate of that particular marketplace combined with the economic environment, we got more cautious at least on the importer side of that marketplace as well. But with that said, and again, we took the top line down by about 5%. We are still looking at a very strong advertising marketplace for us in 2008, that the issues that our core customer is faced in terms of less effective marketing and the need to actually now begin to aggressively convert some of those traditional channels to new effective means has us in a very strong situation.

Our backlog today going into this quarter is stronger than it was a year ago. Our sales force is larger than it was at any time before. And the large customer relationships that we have are helping to establish the ability to get more business from those customers at a level that continues to grow. And so, we've anticipated a growth rate in '08 now in the advertising side between 26% and 32%. We fully expect to be able to deliver on those numbers as we are entering the year we feel in a very strong position with each of our customers.

Operator

Our next question comes from Sandy Draper from Raymond James.

Alexander Sandy Draper - Raymond James

Thanks. Just one housekeeping item would be, if you could just, Wayne, give me the number of online sponsor programs for the third and fourth quarter that would be great. And then more broadly nice tick-up in the number of physician page views, and I know you have been sort of saying approximately or over 1 million for the last couple of quarters, you jumped up to 1.5. How much of that is that substantially growth in one quarter? Is it more just even modestly moving up even now you hit a threshold that would suggest you can step up to say 1.5 million? And then can you help me tie that into the CME, just what's sort of really driving the physician adoption because both numbers were very strong? Thanks.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Yes, first question how many advertising programs do we have up and running during the fourth quarter was about 525. I think the prior year was 400 and change... I don't have the exact number in front of me. So clearly it's a strong list and a the number of programs that we have running which in many cases carry through to 2008 at many of the deals that we do, typically will run for 6 or 12 months in length.

The physician traffic that we've talked about and the 1.5 million visitors during the quarter is clearly something that we've worked hard towards, we acquired Medsite now, I guess about a good year and half ago. We fully integrated their capabilities. We have built the professional networks similar to consumer health network now that is building on the synergy of our visits. We put a common registration system in place. We are able to really sort of cross-pollinate content in the way that we hadn't before.

We are taking the technology platform that I talked about earlier for the consumer side and now launching our professional network on to that same platform over the next several months. And we expect that, that will not only help us gain efficiencies from a production standpoint, but also allow us to leverage some of the new technologies that we have demonstrated... worked very effectively on the consumer side. It's clearly an important part of our overall strategic plan.

Operator

Our next question comes from Anthony Petrone from Maxim Group.

Anthony Petrone - Maxim Group

Thanks for taking my questions. Firstly, on the portals side, can just give a little bit more color I guess on the, where particularly are you seeing... is it a slowdown, an elongation of the sales cycle or a genuine deterioration of business? Say it another way, are leads still coming in or has interests just kind of dried up a bit due to economic conditions? And the follow-up would be the timetable on the ViPS and Porex, the language seems to be similar to last quarter. Can you give us maybe some additional color on that? Thanks.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

The private portals segment is continuing to grow, it is growing more slowly than we had experienced in the past. We believe that some of that is due to the economic cycles. We know that another portion of it over the last 12 or so months has been due to competitors coming down market to provide the kind of services that we had uniquely provided over the prior period. And when we launched WebMD Health Coaching about a year and year half ago, it certainly put us in more competition with the larger into these managers.

So, we've stepped into a more competitive arena with some of our services. We did that with knowingly, and the result has been certainly that it's taken longer to deals closed because now there are multiple vendors or providers that customers can compare us to if you will. But overall, we are seeing a growth rate that will approximate what we saw in the fourth quarter. We're expecting roughly about 10% growth rate on the top line coming from both up-selling current customers, as well as bringing on new customers. But clearly that's not a gross rate that, that's consistent with what we expect and certainly what we're driving the ad markets to, and something we are thinking very hard about right now.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Porex [ph] was coming in a substantially lower margin on the incremental revenue than we are experiencing at the WebMD core businesses.

Operator

Our next question comes from Brian Pitz from Banc of America Securities.

Brian Pitz - Banc of America Securities

Thank you. In terms of your updated guidance related to the proposed acquisition of Yahoo! by Microsoft, I think on February 11 you mentioned. Given the uncertainty and timing of this transaction we are wondering why you felt the event would warn a more conservative outlook in your relationship with the Yahoo! in '08?

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Wayne, why not I take that one.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Okay.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

From the experience we have had in the past through communication with Microsoft, we don't believe that they are going to be elated over the contractor relationship we have going forward with Yahoo! even though the contract we have executed with Yahoo! would be binding upon Microsoft that they ended up acquiring Yahoo! But based on the fact that we don't know what the outcome is going to be there. We are assuming the probability probably would be that Microsoft would end up with the Yahoo! here. We are not sure what the... how Microsoft would be exposed being receptive to the contracts that's in place. We thought it was properly conservative at this time to reduce the projections that we had built in from the revenue that we are going to be generating from Yahoo!, because the bulk of that would be in the latter part of this year since we just started this last month. And we don't believe... and so we feel it was the prudent thing to do based on the circumstances.

There was nothing else involved other than that. If you do remember going back to 2005 we did have a joint venture with Microsoft which was cancelled back then in relation to their inventory. And so it is something that we're going to have to deal with. We think we have a very strong contract. We find it unfortunate that this is taking place from our perspective and we'll deal with it accordingly.

Operator

Our next question comes from John Kelly from Citigroup.

John Kelly - Citigroup

Hi, Marty. After this merger concludes, could you walk through what WebMD will look like specifically the capitalization of the company? And could you address the... you touched on this a little bit, the convertibility of the bonds into the stock and cash and the number of shares that they would be converted into? And then finally, the cash base and most importantly what would the business look like going forward? Thank you.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Let me try to answer part of that. We will have assuming that the bonds are not converted over $700 million in cash and investments compared to $300 million at this time, they will be, assuming we had around $650 million outstanding and two converts one in three quarters, one of three in M&A, that will be convertible substantial premiums over market, very substantial premiums and will be convertible approximately half cash and half stock. We will have over a billion in assets in WebMD. We will an NOL somewhere approximately between $500 million and $600 million of WebMD at that point. We will have reduced the number of shares outstanding by around 20% to about $45 million based on the shares currently outstanding. So that reduction would be down 20%.

The controlling interest in WebMD is eliminated as a result of the merger, and both the shares will be in the hands of the shareholders enhancing I believe the liquidity of the WebMD stock which has been a problem and getting the stock directly into the hands of the investors of HLTH which is the primary reason I believe most of the investors have held are in... their primary reason most of the investors are in health today. We will have much more focus only on the WebMD situation by members of the Board and other members of management to maximize the business as well as the appreciation of the stock of WebMD in the future.

I think it's a plus-plus for WebMD. It's a difficult environment today to be putting that many new shares out there into the public hands or into the hands of the HLTH shareholders. But as I said before I think the overwhelming majority of the HLTH holders are interested in the position in the WebMD from the discussions I have had with the respective institutions. Hopefully that answers your question.

John Kelly - Citigroup

Thank you.

Operator

Our next question comes from George Askew from Stifel Nicolaus.

George Askew - Stifel Nicolaus

: Yes congratulations on the merger announcement. Most of my questions have been asked, but regarding incremental margins when you commented in the past that in 2008 incremental margin should top 50% of WebMD EBITDA margins I believe. There was a comment earlier in the call regarding the lower margins at the private portals business. Can you give us breakout of what incremental margins look like at the advertising business versus portals? And are you still confident in north of 50% incremental margins going forward?

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

We have commented on incremental margins as they have continued to accelerate as our advertising-driven business continues to make up a larger proportion of the overall revenues. In the fourth quarter, for the business overall, we saw margins from incremental revenues exceeding 60%. So we feel very good about carrying that kind of leverage into 2008.

Again, as our expectation is that even though the private portal margins have continued to decline, the advertising mix in the overall revenue stream has been such that we see it boosting the overall average. And there is nothing that we see in the future that should change that kind of trend line.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

In relation to the private portal, since more and more of it is going to be offline, we see the margins there only being in the 15% to 20%. But I can be off from that, Mark, you want to correct that, so feel free to.

Mark D. Funston - Executive Vice President and Chief Financial Officer of WebMD

I think that's accurate.

Operator

Our next question comes from the Corey Tobin from William Blair & Company.

Jeremy Lopez - William Blair & Company

Hi, thanks. It's Jeremy for Corey. Wayne, I think you eluded on this several questions ago, we wanted to talk about the public portal. I think in past quarters you have talked about sort of the appetite for advertisers to even want to book early. And I am wondering if that's a trend you are still seeing, is that a function of the... there is sort of limited quality real-estate and online health advertising? Or is that a function of the sort of the internal approval process as you were talking about earlier?

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

When we did comment on that, I think it was around the September timeframe, what we were seeing was that several advertisers, particularly pharmaceutical advertisers came to us booking business or that wasn't really scheduled the start until the first quarter of 2008. That was unusual for us to see that kind of early booking at that point in time.

As we've now entered '08, obviously we are bringing those early bookings and backlog into the year, but at this point we're really pretty much planning with our customers for the next several quarters out. We did experience early sales for our video content where we had a one very large consumer products company, reserved more than... actually more than half of our video content for the full year of 2008. And we... I guess to your point, we continue to hold out high value parts of our site out in a way that we can maximize and optimize the revenue productivity from those components.

So, it's a very strong market for high quality media placements, I think what's happing in the economy today is it's driving advertisers towards higher quality as... in general there is lot of media available offline, and to some extent with a lot of the aggregators online. But the amount of quality inventory that is out there is still relatively fixed and somewhat limited, and that's where we play the strongest.

Jeremy Lopez - William Blair & Company

Okay, and aside from sort of the idiosyncratic developments in those couple of drugs that you had maybe a small setback with, can you maybe speak to the health of the pipeline as kind of... as you've seen it unfold in early '08 or is that kind of not enough of a data point to really judge it by?

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

To about our sale pipeline?

Jeremy Lopez - William Blair & Company

Yes.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Our sales pipeline is very strong. Again, we have got a backlog of programs that are sold in, and we have a very strong pipeline of new deal discussions, proposals and the like that are out there. We've worked very closely with our largest customers to build longer term sort of pricing agreements so that they are very incentive to give us more volume through the calendar year. And that allows us to put them on sort of a marketing path or sales plan that goes deeper into the overall company but then also gives each of the brands whether there are a $2 billion brand or simply a $500 million brand, the same sort of incremental benefit of moving business to WebMD. So, we are in a position right now to continue to increase the penetration of our largest accounts in 2008 at levels that we haven't done so before.

Operator

Our next question comes from Kar Kwong [ph] from Needham & Company.

Unidentified Analyst

I just have a quick question about the converts. At what price do they convert a post the merger?

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

I can't give you an exact price, but we can work at that computation. I believe it's somewhere in the 40s initially, subject to certain adjustments.

Unidentified Analyst

Okay. And you said they are converting to half cash, half stock?

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

That's correct.

Unidentified Analyst

All right, thanks.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Approximately.

Operator

Our next question comes from Heath Terry from Credit Suisse.

Heath Terry - Credit Suisse

Great, just one follow-up question. Wayne, we're working through the process, or you have been working for the process or rearchitecturing the site to better improve your listings on search engines. We've seen pretty significant improvement over the last year, and where you're showing up in health related key words. We appreciate if you kind of give us an idea of how far through that process you feel like we are at this point and to what degree it's impacting the traffic to the site from search?

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Sure. As I commented earlier that, I just pull [ph] my sense, I guess... but that we are now... our search engine optimized traffic is up roughly about 50%. So as many of you know that means that we don't buy traffic, but rather when people are using a search engine like Google and typing in a health term, our content links are now showing up on the first page enough times that it's creating a click-through and an ultimate traffic flow-through of 50% greater than we have seen before. We tracked the 400 most frequently searched health terms and in the month of January we ranked on the first pages of Google and Yahoo! on 200 of those 400 terms.

So, I would comment that the progress we've made has been very strong, I would also add, however, that there is still a lot of room for improvement to go. We do have other sites that we are working to optimize other than simply WebMD.com. There is a long tail in terms of health searches, so even though the 400 are important getting the next 400 actually has a lot of leverage. And so our ability to continue to grow our organic traffic both through people coming direct into WebMD or simply through the health terms that they type into the search engines, it's something that we are still very acutely focused on.

Operator

Our next question comes from William Morrison from ThinkEquity.

William Morrison - ThinkEquity Partners

: Hi, thanks. One quick follow-up... two follow-ups. One, you commented a couple of times that the backlog is buffing, really strong and I was just wondering if you could quantify what percent of your guidance on the advertising business is above businesses for that matter are represented by your current backlog?

And then secondly, I am a little bit confused on the... what you said about incremental margins kind of staying up at 60% level, if I look at the high end of your revenue guidance... or I am sorry the low end of your revenue guidance and the high end of your EBITDA guidance, I get to an incremental margin in kind of low 40% range. So I am just curious if you are being very conservative there or if I misunderstood what you said about staying up in the 50% to 60% incremental margin range? Thanks.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

Sure, let me answer this first one and I'll have Mark, maybe Mark give you more color on the margin question, Bill. In terms of our backlog we don't really discuss exactly what that mix is between forecast and backlog. I can tell you that the health of our backlog is several folds, it's not dependent on any one large customer or deal if you will. We've sort of bit the bullet as we saw two significant products come off the market late January. But in general the backlog is pretty well distributed across pharma, across biotech and across consumer products companies as well. So, we feel pretty good about the quality of the backlog and also about the sort of the confidence in terms of its sustainability.

And secondly in terms of its relationship, the booking as I mentioned earlier to an earlier question as we forecast the cycle time from sale to revenue, we have taken into account our experience in 2007 to whatever expense some of products that are in that backlog. We take longer for approval and ultimately longer to implement. We have worked that into the forecasting model as well.

Mark D. Funston - Executive Vice President and Chief Financial Officer of WebMD

And on the incremental margin, I don't Wayne said that we are looking at 60% next year, and that was where we left the year. Our fourth quarter incremental margins were over 60% and you are right, we are looking at slightly lower margins in our new guidance than we were previously. But we still see incremental margins on the advertising side of business in that 50% range for '08.

Anthony Vuolo - Chief Operating Officer

And Bill this is Tony Vuolo just to comment on the incremental margin and the question you had earlier. You know what there is a seasonality in our business, and if you look at the quarterly revenues it's been there for last three or four years. And our revenues tend to be more back-end weighted in the year particularly to the third and the fourth quarter. So, when you look at the incremental margins they are always stronger in the back half of the year than they are in the first part of the year. So, when you see the fourth quarter at 60%... and we commented on the year but it's probably in the about 45%-50% range. And when you look at next year you will see the same ramp-up start lower in the early quarters, and then ramp up to a larger number in the fourth quarter.

Operator

Our next question comes from Sandy Draper from Raymond James.

Alexander Sandy Draper - Raymond James

Great, thank you. Two quick follow-ups, one, Mark, would you expect any significant corporate expense from HLTH to carryover to WebMD or is it pretty much all of that go away? And then the second question maybe for Wayne, I know you haven't had a lot of time to think about it but any comment or reaction to the Google announcement today would be appreciated. Thanks.

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Vuolo, I'll take the first part, but Wayne, you can take the second part.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

All right.

Anthony Vuolo - Chief Operating Officer

As far as any incremental expense as a result of the merger, there is going be some incremental expenses, but it's the same expenses that WebMD would have to take on just from its normal growth and being an independent public company, not 85% owned with sharing certain of the services with the parent company. But I don't believe it's going to be that material for a meaningful in relation to our margins or our earnings.

Wayne T. Gattinella - Chief Executive Officer, President of WebMD Health

I didn't see the Google announcement this morning. It effectively appears to be a beta test with a small patient population in a clinic in a way that would enable the patient to take their data that resides inside that clinic, and also be able to store and access it through some softer mechanism that Google would be implementing, it wasn't very detailed. There are several companies who are offering an approach to store peoples' personal health information. Microsoft announced something end of last year. This Google beta has sort of raised [ph] an example.

Our approach has been to not only help people build personal health records and secure information, but more importantly to then able to integrate our decision support tools with that information. So that the value that people derived is a set of very import informed health and benefits position, and that truly is the value that we sell. And to be able to do that over the last five to six years, we've built interfaces with hospitals and physician offices, pharmacy labs and the like to be able to build out these personal health applications. You may have seen IBM just put a press release out last week reporting that 80% of their employees now had the personal health information inside at the WebMD personal health record that we provide for them, and using it to help make these kinds of decisions.

So our view is that, if Google or any of these other companies who are also building some form of a secured repository, ultimately over time develop meaningful data repository, then we will certainly inter-phase of them too, just like we today import data directly from the providers with the permission of the consumer. We would import that data wherever else they may have it stored, whether that be Google or Microsoft or any other sort of software application.

Operator

Our next question comes from Anthony Petrone from Maxim Group.

Anthony Petrone - Maxim Group

Just a quick follow-up on the post merger share count, is that inclusive of the converts? And if not... if the math is correct, I'm working about $7 million or $8 million post dilution, if you go to mid 40s?

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

Mark, do you want to answer that or Tony? I think if you go into mid 40s, it is dilution of how many additional shares, but the intentions are written... certain specific... each debenture is slightly different than its premiums built into them, but what price is they actually even convert, and they are pretty substantial premiums over a phase. So, I think you have to read the indenture carefully before reach any conclusion of additional dilution.

Mark D. Funston - Executive Vice President and Chief Financial Officer of WebMD

Right, but the share counts that we gave do exclude any conversion of the converts, and assume they remain outstanding.

Operator

Our final question for this evening comes from Mr. Corey Tobin from William Blair & Company.

Corey Tobin - William Blair & Company

: Hi, thanks. Just two quick follow-ups that are more housekeeping. Mark, I think in your prepared remarks you mentioned a $3.6 million gain from the content business sale, I would assume that relates to $3.2 million in income from discontinued operations implying a $400,000 loss from operations in the core business?

Mark D. Funston - Executive Vice President and Chief Financial Officer of WebMD

That's right. There were some one-time charges as well in the quarter associated with divesting that business.

Corey Tobin - William Blair & Company

: Okay. So there is nothing in the interest income line of WebMD that relates in any way to that sale?

Mark D. Funston - Executive Vice President and Chief Financial Officer of WebMD

No.

Corey Tobin - William Blair & Company

: Okay. And then second, Marty, with respect to NOL, just sort of the anticipated NOL that you have left over following a transaction, I would assume that.. did that... that includes the contemplated sale of Porex and ViPS, any gains or losses associated with those sales?

Martin J. Wygod - Chairman and Acting Chief Executive Officer of HLTH Corporation

That's correct.

Corey Tobin - William Blair & Company

: Okay, thank you. That's all.

Operator

Ladies and gentlemen, as a reminder if necessary there is a replay available of this call which can be accessed toll free at 888-266-2081, or if you are calling from outside the U.S., that's 703-925-2533. The pass code is 1192938. There is also the webcast replay available on HLTH Corporation and WebMD website as well. Thank you for joining us today.

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