WebMD Health Corp. Q1 2006 Earnings Conference Call Transcript (WBMD)

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

WebMD Health Corp. (NASDAQ:WBMD)

Q1 2006 Earnings Conference Call

May 2, 2006, 4:45 p.m. EST

Executives

Martin J. Wygod, Chairman

Anthony Vuolo, Chief Financial Officer

Wayne T. Gattinella, President and Chief Executive Officer

Risa Fisher, Vice President of Investor Relations

Analysts

David Veal - Morgan Stanley

Anthony Noto - Goldman Sachs

Rob Kelly - Smith Barney

Mark May - Needham & Company

Matthew Ripperger (ph) - Citigroup

Anthony Petrone - Maxim Group

Operator

Good afternoon and welcome everyone. Welcome to the WebMD Health Corp March 2006 Quarterly Conference Call. Today’s conference is being recorded. I would now like to turn the call over to Ms. Risa Fisher, Vice President of Investor Relations. Ma’am you may begin.

Risa Fisher

Good afternoon and welcome to our first quarter earnings call. I will read the following statement 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 our future performance and the amount and timing of the benefits expected from acquisition from new products and services and from other potential sources of additional revenue. 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 risks relating to market acceptance of our products and services, relationship with customers or strategic partners, difficulties in integrating acquired businesses, and changes in economic, critical, or regulatory conditions or other trends affecting the healthcare, internet, and information technology industries. Many of these risks and uncertainties are described in our SEC filings.

We expressly disclaim any intent or obligation to update these forward-looking statements. The earnings release issued today is available on our website at www.wbmd.com in the Investor Relations section and has also been included in the Form 8-K filed today with the SEC which also includes and exhibit furnishing the summary of the financial guidance we will discuss on this call. The Form 8-K and our other SEC filings are also available on our website and on the SEC’s website. The release in Form 8-K that we filed today includes reconciliations between GAAP and non-GAAP financial measures to be presented in this call. And now, I would like to turn the call over to our Chief Financial Officer, Tony Vuolo.

Anthony Vuolo

Thanks Risa. Good afternoon and thank you for joining us today. On the call today are Martin Wygod, Chairman of the Web Board; Wayne Gattinella, President and CEO; and David Gang, EVP and Chief Technology Officer. I will review our first quarter financial results and updated 2006 guidance. Wayne will then review the quarter and give an update on our 2006 initiatives and our announcement today regarding the plan launch of our HSA decision-support tools in our expanded Fidelity relationship. And Marty will make some closing comments and then will open it up to Q&A.

Revenues for the March 2006 quarter was $50.1 million compared to $33.8 million last year, an increase of 48%. Advertising and sponsorship revenue increased 44%, licensing revenue increased 97% and publishing and other revenue increased 91%. Earnings before interest, taxes, depreciation, amortization and other non-cash items or adjusted EBITDA for the March 2006 quarter was $6.5 million compared to $3.6 million last year, an increase of 83%. Adjusted EBITDA at the percent of revenue includes the 13% from 10.6% last year. Adjusted EBITDA per diluted share was $0.11 compared to $0.07 last year. The adjusted EBITDA per share for the March 2006 quarter was computing using a weighted average share count of 57.7 million shares which include the diluted impact of outstanding stock options.

Online services segment, adjusted EBITDA increased 106% to $7.9 million or 17.4% of segment revenue compared to $3.8 million with 12.3% of segment revenue last year. Online services adjusted EBITDA margin and incremental revenue was 29% for the quarter. Excluding $3.6 million in revenue from the Conceptis and eMedicine acquisitions that were running at breakeven and contributed zero margin, the online services adjusting EBITDA margin on incremental revenue was approximately 40%.

Publishing and other services segment adjusted EBITDA was a loss of $1.3 million compared to a loss of $247,000 last year. The increase in the loss was attributable to a change in product mix due to the addition of WebMD the Magazine and Conceptis offline medical education which is not exist in the March 2005 quarter and lower margin from our Little Blue Books addition products due to a shift in timing of product delivery compared to last year.

Net loss of $4.2 million for $0.07 per share for the March 2006 quarter includes the impact of the adoption of FAS 123R on January 1, 2006 which requires the expensing of stock options. The adoption of FAS 123R had a stock compensation expense of $5.7 million in the March 2006 quarter without which net income would have been $1.5 million or $0.03 per share compared to a loss of $956,000 or $0.02 per share last year.

Looking further of the revenue increase of 48% compared to last year, this growth was attributable, was attributable to advertising and sponsorship revenue increase of 44% resulting from both organic growth and our acquisition with Conceptis Technologies in December 2005 and eMedicine in January 2006. Excluding the $3.6 million in revenue from Conceptis and eMedicine, the increase in advertising and sponsorship revenue was 28% compared to last year.

Private portal licensing revenues increase 97%, again resulting from both organic growth in our acquisition of HealthShare Technology in March 2005. If we include HealthShare’s revenue for the first 2.5 months of a quarter prior to its acquisition in 2005, licensing revenue increased 50% year-over-year. Publishing and other service revenues increased $2.4 million or 91%, this was primarily due to the introduction of WebMD the Magazine in April 2005, and $1.4 million in revenue from offline medical education as a result of the Conceptis acquisition in December 2005. These increases were offset by an expected decline of $1.7 million in revenue related to content syndication.

Looking at expenses, cost of operations was $24.7 million for the quarter compared to $14.9 million last year, a terrific growth of operations which excludes non-cash items was $22.4 million or 44.7% of revenue compared to $14.8 million or 43.8% of revenue last year, an increase of 90 basis points. The increase was primarily due to a change in revenue mix compared to last year as revenue from acquisition and new publishing products in 2006 of a higher growth of operations on our other products. Sales and marketing expense was $15.5 million compared to $11 million last year. Adjusted sales and marketing expense which excludes non-cash expenses was $12.4 million or 24.9% revenue compared to $9.1 million or 26.9% of revenue last year, an improvement of 200 basis points.

General and administrative expense was $11.9 million compared to $6.5 million last year. Adjusted general and administrative expense, again which excludes non-cash expenses was $8.7 million or 17.4% of revenue compared to $6.3 million or 18.7% of revenue last year, an improvement of the 130 basis points. Additionally, general and administrative expenses includes 839,000 of service fees to our parent Emdeon, a decline from the $1.6 million in the year ago as many other resources that where previously provided to us by our parent were transferred to our business unit after the IPO and now are included in our expenses rather than included as a corporate allocation.

Depreciation and amortization was $3.5 million compared to $2.2 million last year. This increase was due to a combination of the impact of acquisitions in the increase level of capital expenditures in 2005. Interest income totaled $1.4 million for the quarter resulting from the investment of our IPO proceeds. Provision for income taxes was zero for the quarter compared to 61,000 last year. Given the sides of pre-tax loss for the quarter, no provision was required on a quarterly basis. Weighted average sharecount for the quarter was 56.1 million. This sharecount excludes the diluted impact of stock option, since we have reported the loss of the quarter. The diluted share count including the impact of stock options was 57.7 million shares.

Turning to the balance sheet our cash and investment balance at March 31 was $133 million. Operating cash flow for the quarter was $12.3 million compared to $6.2 million last year. Capital expenditures were $6.8 million for the March quarter. Payments made to settle contingent consideration obligations related to past acquisitions were, for the quarter, were $2.4 million. We also made net cash payments of $24.5 million to acquire in eMedicine in January 2006. Additionally, in April 2006, we paid an additional $7.3 million to settle other contingency and obligations. And we expect to pay $30 million to acquire Summex during the June quarter.

Turning to our 2006 financial guidance, our financial guidance for 2006, remains generally consistent with our previous guidance, except it is adjusted for the pending Summex acquisition and the launch of our HSA decision-support tools at expanded Fidelity relationships, which Wayne will discuss further.

As always our financial guidance considers among other things, the timing of expected delivery for program sold, assumptions as per the timing of new sales activity, expenses related to the integration of our recent acquisitions and timing of synergies related to those efforts, continued investment in our infrastructure and organization to support both our public and private portal offerings, a launch of new products and the expansion of our sales and marketing organization.

Our annual guidance for 2006 which assumes the Summex acquisition will close during the June 2006 quarter is as follows. Our revenue guidance increases to a range of $229 million to $238 million, primarily is the result of the acquisition of Summex and actual first quarter results. Our guidance for adjusted EBITDA remains at $47 million to $50 million. As we previously disclosed, Summex currently operates at breakeven EBITDA rate. We anticipate integration and ramp up expenses related to the Summex acquisition as well as the additional expenses related to the launch HSA tools and our expanded Fidelity arrangement in order to be prepared to implement 2007 new business. We expect that we will be able to absorb these additional expenses, through higher margins and other areas. Our guidance for interest income is now $4.9 million to $5.2 million which reflects the use of funds for the Summex acquisition.

Depreciation and amortization is expected to be between $18.2 million and $18.8 million for 2006 which also reflects the impacts of the Summex acquisition. Non-cash stock compensation expense is expected to increase by $1 million to approximately $27 million as a result of stock options to be issued in connection with the Summex acquisition. Non-cash advertising is expected to be approximately $7.5 million and income tax expense is expected to be approximately $2 million. This yields a range of a net loss of $3.9 million or $0.07 per share, a net income of $200,000 which includes the expected impact of adoption of FAS 123R of about $24 million. Excluding the impact of FAS 123R, our projected net income would be approximately $20 million to $24 million. Increases of over 150% to 200% compared to the 2005 net income of $7.8 million. A schedule outlining the company’s financial guidance including additional quarterly guidance is attached, is being issued today, was issued today is being furnished as part of an exhibit to current report on Form 8-K that we are filing today with the Securities and Exchange Commission. I’d now like to turn the call over to Wayne.

Wayne Gattinella

Thank you Tony. We are extremely pleased with our first quarter results and with a strong momentum that we are experiencing in each of the markets that we serve. The internet continues to be an increasingly important of our everyday lives. A few internet study released just two weeks ago shows that more people rely on the internet were making a health-related decision than any other decision category, more than when making a financial, career or even purchase decision online. Today, WebMD is the most recognized brand at health information and has fast become the most trusted source of online health information that consumers and healthcare professionals depend on for health and wellness decisions.

In our public portals market, the reach of the WebMD Health Network, continues to expand significantly. The average number monthly unique visitors in the first quarter reached 29.2 million, an increase of 23% over the prior year period and 14% from the fourth quarter. Page view traffic during the first quarter totaled 746 million pages, an increase of 27% over the prior year period and 25% from the fourth quarter, our online advertising and sponsorship revenues; excluding any contributions from acquisitions, improved by 28%, over a year ago. We continued to great gain strength with large biopharmaceutical and medical devices companies, increasing our penetration of both consumer and professional promotion and educational programs. We also continue to expand our base major consumer package goods companies who launched large branding campaigns during the quarter targeting the health involved audience on the WebMD.

In the March quarter, we ran approximately 400 individual online programs versus 250 programs in the same period a year ago. Our online reach to positions, continue to significantly expand both organically and with the integration of heart.org and emedicine.com sites. In the first quarter, we averaged to more than 1 million physicians as it’s per month to our professional sites. Just as pharmaceutical companies value multiple position contacts by their detailed sales force, they also value each position visit on our sites as well. In the March quarter, a record 479,000 continuing medical education or CME programs were completed on our network, an increase of 71% over the same period a year ago.

During the first quarter, we continue to phase the deployment of our new technology infrastructure that is designed to increase traffic to our network, create new sponsored revenue opportunities and deliver new capabilities that further help our users make the most informed health decisions. We also launched the second phase of our WebMD health search product to further enhance our ability to deliver the most relevant health-related search results on the web; including search results from across the internet in addition to WebMD content. Additionally, we launched the complete redesign of our homepage and key condition channels within the site, making it easier to navigate core content and supporting new advertising units that further increased sponsor revenues.

WebMD Daily, our first broadband content product has been well received by our sponsors and users. WebMD Daily delivers an original 90-second video health story each day that includes an opportunity for sponsors to stream the video commercial or promotional message within the WebMD feature or in the surrounding viewer area. As more consumers are turning to WebMD for complete information on both health and wellness issues, our new programming is responding to the increasing demands from both our users and our commercial sponsors.

Turning now to the private health portals market, WebMD continue to increase its leading market position in providing private health and benefits portals to large employers in health plans. We are seeing the demand for health and benefits application accelerating as large employers and health plans continue to shift more financial responsibility to the employee and plan member. Our private portals revenues increase by 50% over a year ago on a proforma basis which includes HealthShare. Our health and benefits platform is being adopted by large employers in health plan; as the single interface for their employees and plan members to make the medical, cost and quality decisions. We continue to expand our base of private portal customers with the addition of Prudential, MetLife as well as two national accounts sold through our Signacare (ph) Allies Relationship. Our install base the private portal clients, at the end of March 2006 total ED Company compared to 62 at the end of March 2005. As consumers are assuming greater responsibility for the healthcare decisions, the kind of decisions support applications delivered on the WebMD platform are essential.

With the emergence of health savings accounts or HSAs, we are beginning to leverage our platform to integrate both the healthcare and financial planning tools needed in the CDHP market and we are accelerating out efforts in this area. Today, we announced our plans to launch new healthcare retirement planning tools that will help consumers project their healthcare costs both in the near-term and in retirement in order to maximize the use of the HSA funds. These new tools will combine the WebMD personal health profile with regional healthcare cost and provide our quality data, to provide a highly personalized view of an individual’s healthcare needs.

Today, we announced and expanded marketing agreement with the Fidelity investments, to incorporate our new HSA decision-support tools into Fidelity’s HSA offerings that will be marketed to therefore 1K pension and payroll customers. The new integrated HSA offering will help employees make important healthcare and financial planning decision by combing Fidelity’s core, financial management services with the WebMD’s healthcare cost planning tools. At consumer-directed healthcare that attracting the interest of a large group of both financial and healthcare players, we are currently evaluating a number of partnership opportunities in the staff emerging market.

On April 17, we announced that we had entered into a definitive agreement to acquire Summex Corporation, a provider of comprehensive health and wellness programs that include online and offline health risk assessments, lifestyle education and personalized telephonic health coaching. Since 1993, Summex has been helping incorporations and health plans to reduce healthcare costs and approved the overall health of their employees and plan members by deploying a team of professional health coaches who work one-on-one with employees and plan members to change high risk behaviors that can lead to illness and increase medical cost. The Summex programs will complement our online health and benefits platform and we expect to market the services to both new and existing customers, starting in the second half of this year.

In summary, WebMD is uniquely positioned to capitalize on the market trends in our industry, both in the public portals market as BioPharma continues to shift more of their consumer and professional marketing dollars online. And in the private portal business as major employers and health plans seek a consumer facing platform as they move towards consumer-directed healthcare.

Now I’d like to turn it over to Martin Wygod for some closing comments before we open up the call for questions and answers.

Martin Wygod

Thank you Wayne. It’s easy to get consumed with the daily challenges. So occasionally, I tried to remember to take this step back to reflect that how far we’ve come. Just 5 years ago WebMD had operating losses of $80 million and look to be facing the same fate as many other internet startups. Three years ago, after reconstructing our business model we’ve reached breakeven and began to feel confident in our ability to build WebMD into a high growth company. We have since tripled the size of our organization. Growing our sales headcount management team by 5 fold, assembled the world-class technology team, and made very significant investments in our infrastructure.

Other than the positions, the internet has become the place where people relay on most, when making the health-related decision. And WebMD has become the most recognized brand of health information and the most trusted source of online health information that consumers and healthcare professionals depend on for health and wellness decisions.

We’ve demonstrated substantial progress this quarter. Yet, we believe we are just at the early stages of a very exciting and large opportunity in the markets we serve. I’m extremely enthusiastic about what the next 3 to 5 years will bring. Over the next several years, internet will become the dominant medium for health information to be gathered, stored and securely communicated. We will be in an online world where there is broad reach to virtually every consumer and healthcare professional. The internet will connect and empower patients and physicians and help to bring down the runaway cost of healthcare while at the same time improving patient outcomes. Large BioPharma medical device of the companies were increasingly depend on the internet to identify and cost effectively reach and educate those who can best benefit from their product and services. The personal health record will be become universally adopted as the standard tools for patients and providers to make inform treatment positions.

Mobile applications will allow real time financial and medical data and treatment information to be delivered on-demand at the point-of-care. Patients and their physicians will be able to securely communicate online to make the best healthcare decisions based on class treatment and quality. We have the necessary building blocks and believe we’re uniquely positioned to benefit as this mission becomes a reality. With our strong ad assets established brand and domain expertise, we are well-positioned to play an important and increasing role in the health management continually. Thank you very much for joining us today and operator at this time, you can queue up the questions.

Question and Answer Session

Operator

Thank you we will now begin the question and answer session. (Operator’s Instructions).

Our first question comes from David Veal from Morgan Stanley; you may ask your question.

David Veal - Morgan Stanley

Hi great, thank you. Just looking at the CapEx line, I feel sort of running a little bit about $2 million ahead of our estimate. I’m wondering if you can just sort of recap for us where the investments are directed and how you might see this planning out for the balance of the year.

Anthony Vuolo

Sure Dave this Anthony Vuolo. Our investments, capital expenditures in the first quarter primarily focused on the enhancement that we are making through our technology platform. And, something that, we currently we anticipated this year. On our last call, we stated that our guidance for capital expenditures will be $20million to $25 million and at this point we are pretty much tracking for that rate for the year.

David Veal - Morgan Stanley

Okay, great thank you.

Operator

Our next question comes from Anthony Noto from Goldman Sachs.

Anthony Noto - Goldman Sachs

I was just wondering if you could just clarify, I think we have the calculation right, but your organic growth looks like it was 25.3% year-over-year and if correct, it looks like it didn’t flow down at all from the fourth quarter which is pretty positive. And then Wayne my second question is on the HSA offering, have you guys considered putting that on, on the free portal like a down, down sort of white viewable versions, so consumers, I am sorry individuals can get used to using a, even now it may not be sold into a corporate, I was wondering if they’re trying to find it and its not, something I can use on my own, it serve like a financial planning tool sort of speed the, sort of, less premium lower quality service, but if you get individuals using it, it actually drives traffic and advertising dollars that could actually credit pull from corporations, as suppose of push? Thanks.

Anthony Vuolo

Anthony this Tony Vuolo. When you, when you’re, asking about organic growth in revenues, are you looking at total revenues, online revenues and over what period?

Anthony Noto - Goldman Sachs

All right, total revenue, year-over-year first quarter of 2006 on a year-over-year basis.

Anthony Vuolo

Well I think if you, if you take the $50.1 million and that of the $5 million in total from 2 acquisitions you get $45.1 million compared to the $33.8 million last year and I think that is your rate, bear with me, because I’m doing the math as we’re talking here. I think like it’s, have it in front of me.

Anthony Noto - Goldman Sachs

Clearly closer to 34%

Anthony Vuolo

34%, 34%...

Anthony Noto - Goldman Sachs

Okay.

Anthony Vuolo

I don’t know how you got the, the 25.3 that you’ve quoted.

Anthony Noto - Goldman Sachs

Well, You now just clarified it thank you.

Anthony Vuolo

Yeah and one thing I would point out which I think, is that the organic rate even in total back in the 28% range is that, in a year ago quarter it was about 1.8 million from HealthShare, let me run only on HealthShare for 2 weeks during the quarter.

Anthony Noto - Goldman Sachs

Okay.

Anthony Vuolo

If you added that 1.8 million, back it would be about a 28% growth rate I think.

Anthony Noto - Goldman Sachs

Great thank you.

Wayne Gattinella

Anthony on the second part with respect to our new health savings account tool, we are launching them in the private portal environment, it’s a start but much likely we have done with other private portal, simple private portal applications we have ported them into the public, as you said sort of, skinny down versions, so for example on the public side today, we have health assessment tools, that are sort of mini versions of a full health risk assessment, they don’t quite profile the user at the same extent that have might inspired an employer environment. But there is still design to be able to give people at least in particular, sort of, micro categories, cardiovascular or allergy or diabetes or specific areas, the ability for someone to asses the risk based upon, these intelligent efficient support tools., We, we would expect to all support on health retirement, healthcare retirement planning tools of the public portal, again there will be skinny down versions wont have all of the, plans specific or plans profiled, all information on the user but nevertheless, a lot of the things we’re building that will enable you to both project your healthcare costs in the future, in general, based upon the region of comparisons of particular cost et cetera, will be part of the, of the public portals you mentioned for both customer satisfaction and also traffic drivers in the future.

Anthony Noto - Goldman Sachs

Thank you.

Operator

The next question comes from Rob Kelly from Smith Barney. You may ask your question.

Rob Kelly - Smith Barney

Wayne, based on the present trends of consumer utilization of your consumer sites and a physician utilization of your professional sites, could you give us some idea of what percent of the marketing and advertising spend might come online as well as offline?

Wayne Gattinella

You’re talking about the part in the market itself.

Rob Kelly - Smith Barney

Yeah the one, one you’re addressing now.

Wayne Gattinella

Yeah its, the total number that’s, out there right now in the industry said that roughly 5% of advertising is online in, in many of the markets we target in BioPharma, et cetera its less than that, still the line share dollars are spent in offline channels on the professional site, where most of the dollars are spent by pharmaceuticals companies. They’re clearly they are spending far more than dollars offline and online. So, despite our significant growth rates and our projected growth to go, we still have a tremendous amount of head room both in terms of moving dollars some offline to online. But as we believe those dollars will accelerate both in near and mid-terms that would be expected to be the receipt in the back shift as it occurs.

Rob Kelly - Smith Barney

Thanks.

Operator

Our next question comes from Mark May from Needham & Company; you may ask your question.

Mark May - Needham & Company

Thanks for taking my question. First one, how much is Summex contributing to your guidance for the rest of the year?

Anthony Vuolo

Pretty much be, in higher increase other than the first quarter results which I think is about, I think we got that $6 million in there for Summex

.

Mark May - Needham & Company

$6 million to $7 million, okay, wonderful. And what is the maximum outstanding earn outs that you could pay going forward?

Anthony Vuolo

I think if you go back to our disclosure Mark, I don’t have it right in front of me. But it fully disclosed in the 10-K. For the balance of this year, we don’t have any other earn outs that other the one that…

Mark May - Needham & Company

April 1.

Anthony Vuolo

April 1, that I mentioned. I think, we have one other earn out payment related to our prior acquisition for $2.5 million. And then the Summex has a potential earn out of $10 million over the next 2 years.

Mark May - Needham & Company

Okay so…

Anthony Vuolo

I think if you are looking for the maximum that’s it.

Mark May - Needham & Company

Wonderful and then last question. Marty in his remarks made a comment about point-of-care service and mobile access information. I wonder if you could elaborate a little bit on that, I’m not aware that you guys are currently offering any sort of mobile service and I assume he was referring to the physician side of your business. So, I wonder if you get elaborate a little bit more on that comment.

Martin Wygod

Do you want to do that Wayne?

Wayne Gattinella

Yeah I believe what Martin with referring to was the trends we see in the future, over the next 3 to 5 years that we believe will be happening in the market and that we believe that we are ideally position to be able to capitalize on, certainly the mobile download of content is becoming more serious than just sort of the, kids play over the last couple of years with, typical sort of music and ringtones and that sort of things. As people are going to have mobile applications for many different situations including healthcare not just from static content but also the ability to be able to present information whenever in the doctor’s office in a consumer-directed world to be able to know what the cost of care rate is before going to the doctor to be able to know where they stand against their each, let’s say account balance, when they are at the physician et cetera, you are going to see a convergence above financial and medical information on the web and we see they use that information in a mobile environment expanding. And I think our point was that as those trends emerge, we see ourselves playing an important part of, that evolution.

Mark May - Needham & Company

Is it….

Martin Wygod

Main stream of the current development and application for health savings accounts consumer-directed health plans to really work in the future. That physician has to know when that patient is coming to his office, what he can charge and how we will be paid. As well from lot of other apartment of financial as well as clinical information, and I think we’ll be in a position as a result of our company and our affiliates to be in the position to have an advantageous position in this space.

Mark May - Needham & Company

Is it fair to say that the vast majority of the $25 million and CapEx with most of which is David’s group is investing, the vast majority of that is going to online properties not the sort of mobile opportunities which are probably further out in the future?

Martin Wygod

That’s a good assumption.

Mark May - Needham & Company

Okay thanks.

Operator

Our next question comes from Mark Mahaney from Citigroup; you may ask your question.

Matthew Ripperger - Citigroup

Hi this is Matthew Ripperger (ph) for Mark. Couple of questions on advertising and sponsorship revenue, what is the, what about the brand growth and the number of customers on the one hand, and then I’m also wondering if, are you doing to talk about what percentage of that revenue comes from CPG customers as suppose to your target Pharma and biotech and Med device group?

Wayne Gattinella

Yeah this is Wayne, as we just talked about we had roughly 400 different online programs represented in a public sponsor programs in the public portal on the quarter on the first quarter up from 250 the year prior. We work with virtually every major BioPharma and medical device company today in some shape or reform, with a number of products, but again with the goal being to penetrate those accounts in the future by representing many, many more of their products. What’s happening that in the consumer package good segment which we have been focused on over the last several years waiting for that market to turn, its beginning to turn for us as virtually every major snack food or beverage company has introduced a line of products in the past 18 or 24 months, with some health-related claim, and the result of that is that well, they don’t necessarily need WebMD to hit their typical sort of, region frequency numbers. They now recognize however that the audience that is on WebMD is a very important part of their core branding and advertising strategy. As the reach of our network also is hitting numbers that are becoming meaningful for them, 29 million unique users per month, it’s, for us we are beginning to attract a much bigger part of that business which, while we don’t break it out, you can certainly go in the site today or any other day and begin to see the kinds of consumer package goods and over the counter type company to represent it on our site.

Matthew Ripperger - Citigroup

Got it and one of the question on traffic, you mentioned that addition traffic, what kind of year in your growth is that 1 million per month look like is that, is it similar to on the consumer side or how do you think about that?

Wayne Gattinella

As you know we don’t really break those numbers out. We have seen and continued to see growth in our physician online traffic. As you know, we have also been acquiring other physician sites that included the heart.org and most recently eMedicine. So our goal has been to continued to consolidate other sites physicians, because they do go to multiple sites with Medscape continuing to be the number one site on the internet that doctors turn to, but we are trying to extend really the brand and the umbrella of information represent the doctors whether it’d be in the particular specialty that represent. Or in the case of eMedicine with emergency reference information that they might be looking for and other ways as well. So, suffice to say I guess, that we view that the physician audience that we attract over 1 million, visit a month now as hands down the leading network for doctors and it’s certainly our goal to continue to monetize that relationship that we have with doctors going forward.

Matthew Ripperger - Citigroup

Thanks very much.

Operator

Our next question comes from Anthony Petrone from Maxim Group.

Anthony Petrone - Maxim Group

Hi thank you. Just at the Fidelity agreement, how do you think going forward that will impact the private portal margin, I am assuming it may have some sort of negative impact?

Anthony Vuolo

Well in terms of going forward, I don’t think it’s going to have a negative impact to our private portal margin, because we expect it’s going to have the similar margin to, to the balance of our online business. As I, as we stated kind of in terms of our guidance for this year, obviously we are going to have, some amount of additional expenses that we are going to incur in terms of rolling out that products. For this year, its not really revenue generated until 2007. We’ve contemplated that in our current guidance, I think we are going to be able to make that up with other margin from areas.

Wayne Gattinella

Yeah I mean just to further that, the, the product development that’s under way to support help our agency services was under development, with or without Fidelity service speak. So, the partnership there is to, is to provide those service for Fidelity integration into their product line, but the cost of development and what not was already factored into our plant.

Anthony Petrone - Maxim Group

No. I just, because it seems sort of like a third party distributional most agreement, but that’s not, doesn’t sounds like that‘s the case?

Wayne Gattinella

You will find the margins reserves are as high if not higher.

Anthony Petrone - Maxim Group

Okay. All right just on to some extent, how many private portal customers are subscribers did you acquired through the acquisition?

Anthony Vuolo

The Summex has been primarily focused in the healthcare market or health plan market. Because they have primarily supported large plan to then sell-through their services to their customer base. So we actually haven’t put that number out there but it’s really been primarily health plan customers some of them we already work with and some of were incremental.

Anthony Petrone - Maxim Group

And you just mentioned last quarter that one of the goals for the company was to sell additional add-on services to some of the private portal clients that may have been, re-subscribing, did the company see any of that this quarter?

Anthony Vuolo

Yes, we did, we have seen that with, with add-on services, you may have seen for example, a Dell put on an announcement only a few weeks ago where they were adopting our personal health record for there entire US based employee group, their CEO did a actually a major press conference on the product. We continued to up sell services into our client base whether that would be quality services or decision-support tools we see HSA set of tools as one of those opportunities and certainly we see some of the health coaching services at Summex delivers as the new area for revenue up sell.

Anthony Petrone - Maxim Group

Okay and just finally on content, I think I’ve missed prepared comments can you just speak as to why the content syndication revenues declined on year-over-year and sequential basis. Was there some kind of one time adjustment there in those numbers?

Wayne Gattinella

Yeah Anthony, I am going to elude to that here because I was hoping to get through this pole without saying to what News Corp want. But in the, last quarter, in the March 2005 quarter, we have one month of News Corp revenues in the $1 million which here was the last month of that, 5-year arrangement and that’s sets the bulk of the decline in content syndication as a News Corp revenues on the way. As a company, we’ve been deemphasizing the syndication of content in favor of more value-added offerings or we can get a more of a premium group of services.

Anthony Petrone - Maxim Group

Thank you very much.

Operator

(Operator's Instructions). One moment please. We have a final question from Mark May from Needham and Company.

Mark May - Needham and Company

Thank you regarding the last comment on deemphasizing syndication deals. Could you give us the numbers, revenue strive from the AOL arrangement and given your comment is that an agreement that you might not aggressively pursue renewing when it comes out for renewal?

Wayne Gattinella

Mark I think you going to miss-construed my comment as it related to AOL, AOL we don’t consider AOL a syndication deal that is an arrangement where we co-program we program the site healthcare site from regret the inventory and we share revenue on that site. The revenue from AOL for this quarter will disclose when we file the 10-Q but is roughly comparable to, what it has been in previous quarters.

Mark May - Needham and Company

Okay thanks a lot.

Anthony Vuolo

Okay thank you every one for joining us today and we look forward to speaking with you next quarter. Thank you.

Operator

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