Ira sohn contest 2012 andrew diaz web md
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Transcript of Ira sohn contest 2012 andrew diaz web md
Ira Sohn Contest 2012 Andrew Diaz
Disclaimer 2
Please note that this presentation and the information contained herein represents my own personal views and not the views of Prudential Financial, Prudential Capital Group or any affiliates.
The information contained in this presentation is based solely on publicly available information
This presentation and the information contained herein is not a recommendation or solicitation to buy or sell any securities.
This presentation contains historical and anticipated operating performance, as well as discussions on access to capital markets, market conditions and the values of assets and liabilities of certain companies. Actual results may vary materially from the estimates and projected results contained herein.
Not for Further Distribution Without My Express Consent
WebMD Health Corp (“WebMD”) 3
WebMD is a provider of health information services online to: Consumers Physicians Employers and Health Plans
Market Value of Equity ~$1.1 billion Enterprise Value of ~$0.9 billion
Recent stock price: $21.431
Ticker: “WBMD” (1) As of close 05/15/2012
Pro Forma for 5.77 million shares purchased @ $26 per for an aggregate cash use of $150 million on 4/10/12. Source: Company 10Q filed on 5/10/12
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Strong Collection of Online Brands 4
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Investment Highlights 5
Source: WebMD 10-K for the year ended 12/31/11, eMarketer April 2011
Strong Catalysts for Realization Within 6 – 12 Months
Secular Winner
110 million unique users; 2.6 million physicians #1 player with ~40% market share
Favorable long-term trends for online pharma ad spending Projected to grow at 13% CAGR to ~$2 billion by 2015
Poison pill expires on November 1, 2012 Upsize to existing $86 million share repurchase program Normalization of ad spending
Strong Competitive Advantages
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Why Does it Trade at ~$22 Today? 6
Failed Sales Process Temporary decline in pharmaceutical ad spending during 2012
FDA regulations for online advertising TBD Patent expirations (e.g. Lipitor ~$10 billion)
Failed Sales Process
Source: Yahoo! Finance, SEC Schedule 13D filed on 10/11/2011
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WebMD 5 Year Stock Price
Icahn Reveals ~8% Stake
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Public Portal 7
~110 million users / ~10 billion page views User is already engaged in researching ADHD
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Physicians Portal 8
~2.6 million physicians
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Private Portal 9
Company Name
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Pharmaceutical Ad Spending 10
Source: eMarketer, April 2011 & CSD Promotion Database
North American Market of $28 billion is roughly 1/3 of promotional spending in the world
Online spending is anticipated to reach ~$2 billion by 2015
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Pharma Relying Less on Sales Reps 11
Secular decline of U.S. sales reps 105K peaked in 2005, ~75K by 2015 Physician Payments Sunshine Act, 2013
Source: IMS Health, The Global Use of Medicines: Outlook Through 2015 & Wall Street Journal, Drugs Reps Soften Their Sales Pitches Not for Further Distribution Without My Express Consent
Long-Term Shift Towards Online Advertising 12
~$28 billion Total Advertising ~$1 billion market size
Source: CSD Promotion Database
~$14 billion Total Advertising ~$4 billion market size
2011 Market Size 2020 Projected Market Size
3.6%
96.4%
29%
71%
2011 % Online Advertising of Total Budget 2020 % Online Advertising of Total Budget
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Historical Financials 13
2007 2008 2009 2010 2011 LTM 3/30Public Portal Advertising $238,022 $284,416 $347,570 $446,969 $477,325 $454,738% Growth 19.5% 22.2% 28.6% 6.8% -4.7%
Unique Monthly Users (Millions) 51 51 61 83 85 110% Growth 0.0% 19.6% 36.1% 2.4% 29.4%
Revenues Per User $4.67 $5.58 $5.70 $5.39 $5.62 $4.13EBITDA Per User $1.08 $1.46 $1.84 $2.09 $2.13 $1.41
Private Portal Services $81,210 $89,046 $90,966 $87,500 $81,450 $79,375% Growth 9.6% 2.2% -3.8% -6.9% -2.5%
Total Revenues $319,232 $373,462 $438,536 $534,469 $558,775 $534,113% Growth 17.0% 17.4% 21.9% 4.5% -4.4%
WebMD Health Corp
Source: Company 10Ks and 10Qs
~15% Revenue CAGR since 2007
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Historical Financials Cont’d 14
~12% Free Cash Flow Yield ~5.8x LTM EBITDA and ~7.8x NTM EBITDA Source: Company 10Ks and 10Qs
2007 2008 2009 2010 2011 LTM 3/30EBITDAA 54,969 74,255 112,274 173,618 181,238 154,631% Margin 17.2% 19.9% 25.6% 32.5% 32.4% 29.0%
Less Capex (19,041) (24,265) (17,886) (32,254) (20,911) (19,439)Less Work ing Capital B (34,317) 2,298 8,444 (12,893) 8,052 15,042Free Cash Flow 1,611 52,288 102,832 128,471 168,379 150,234Less Interest Expense (25,887) (26,428) (23,515) (11,453) (20,645) (23,340)Cash EarningsC (24,276) 25,860 79,317 117,018 147,734 126,894
ROIC D 4% 5% 15% 25% 27%
(A) Defined as operating income + D&A + non-cash stock based comp
(B) Defined as change in AR + Prepaid - Accrued - Deferred Revenue
(C) Excludes taxes due to the Company's NOLs
(D) Defined as EBIT Taxed @ 35% / (Total Assets - Current Liabilities - Cash)
WebMD Health Corp
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Attractive Valuation With Limited Downside 15
Conservative DCF ~$31 per share ~$530 million revenues per year & 20% EBITDA margin Market share falls from ~40% to ~20% while industry
grows at a 13% CAGR 12% Cost of Capital and 2% Terminal Growth
Source: Company 10Ks and 10Qs Not for Further Distribution Without My Express Consent
Company WebMD (WBMD) Epocrates (EPOC) HealthStream (HSTM)
DescriptionWebMD is a provider of health
information services to consumers, physicians and employers.
Epocrates provides healthcare information services primarily in the mobile space to 1.4 million physician
members.
HealthStream provides learning and research solutions for the healthcare
industry.
LTM Revenues (000s) $534,113 $111,700 $87,234LTM EBITDA (000s ) $154,631 $9,503 $17,865EV / LTM EBITDAA 5.8x 11.7x 25.5xEV / LTM RevenuesA 1.7x 1.0x 5.2x5 Year Revenue CAGR 15% 15% 19%
(A) As of close 05/15/2012
Relevant Comps
Additional Upside Opportunities 16
~$250 million NPV of Federal NOLs ~$5 per share May remain in CoC according to management
Monetize Mobile Growth 11.5 million consumer app downloads 2.0 million physician app downloads
International Opportunities French and German physician sites
Source: WebMD 10-K for the year ended 12/31/11, WebMD Conference Call Transcripts Not for Further Distribution Without My Express Consent