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Ira sohn contest 2012 andrew diaz web md
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Ira sohn contest 2012 andrew diaz web md

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  • 1. asdfIra Sohn Contest 2012 Andrew Diaz
  • 2. Disclaimer2   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
  • 3. WebMD Health Corp (“WebMD”)3   WebMD is a provider of health information   Recent stock services online to: price: $21.431   Consumers   Physicians   Ticker: “WBMD”   Employers and Health Plans (1) As of close 05/15/2012   Market Value of Equity ~$1.1 billion   Enterprise Value of ~$0.9 billion 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 Not for Further Distribution Without My Express Consent
  • 4. Strong Collection of Online Brands4 Not for Further Distribution Without My Express Consent
  • 5. Investment Highlights5 Secular Winner   Favorable long-term trends for online pharma ad spending   Projected to grow at 13% CAGR to ~$2 billion by 2015 Strong Competitive Advantages   110 million unique users; 2.6 million physicians   #1 player with ~40% market share Strong Catalysts for Realization Within 6 – 12 Months   Poison pill expires on November 1, 2012   Upsize to existing $86 million share repurchase program   Normalization of ad spending Source: WebMD 10-K for the year ended 12/31/11, eMarketer April 2011 Not for Further Distribution Without My Express Consent
  • 6. 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) $70 $60 $50 Failed Sales Process $40 $30 $20 Icahn Reveals ~8% Stake $10 $0 WebMD 5 Year Stock Price Source: Yahoo! Finance, SEC Schedule 13D filed on 10/11/2011 Not for Further Distribution Without My Express Consent
  • 7. Public Portal7   ~110 million users / ~10 billion page views   User is already engaged in researching ADHD Not for Further Distribution Without My Express Consent
  • 8. Physicians Portal8   ~2.6 million physicians Not for Further Distribution Without My Express Consent
  • 9. Private Portal9 Company Name Not for Further Distribution Without My Express Consent
  • 10. Pharmaceutical Ad Spending10   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 Source: eMarketer, April 2011 & CSD Promotion Database Not for Further Distribution Without My Express Consent
  • 11. Pharma Relying Less on Sales Reps11   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
  • 12. Long-Term Shift Towards Online Advertising12 2011 Market Size 2020 Projected Market Size  ~$28 billion Total Advertising   ~$14 billion Total Advertising  ~$1 billion market size   ~$4 billion market size 2011 % Online Advertising of Total Budget 2020 % Online Advertising of Total Budget 3.6% 29% 71% 96.4% Source: CSD Promotion Database Not for Further Distribution Without My Express Consent
  • 13. Historical Financials13 WebMD Health Corp 2007 2008 2009 2010 2011 LTM 3/30 Public 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 $4.13 EBITDA 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%   ~15% Revenue CAGR since 2007 Source: Company 10Ks and 10Qs Not for Further Distribution Without My Express Consent
  • 14. Historical Financials Cont’d14 WebMD Health Corp 2007 2008 2009 2010 2011 LTM 3/30 A EBITDA 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 15,042 Free Cash Flow 1,611 52,288 102,832 128,471 168,379 150,234 Less 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 Companys NOLs (D) Defined as EBIT T axed @ 35% / (T otal Assets - Current Liabilities - Cash)   ~12% Free Cash Flow Yield   ~5.8x LTM EBITDA and ~7.8x NTM EBITDA Source: Company 10Ks and 10Qs Not for Further Distribution Without My Express Consent
  • 15. Attractive Valuation With Limited Downside15   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 Relevant Comps Company WebMD (WBMD) Epocrates (EPOC) HealthStream (HSTM) Epocrates provides healthcare WebMD is a provider of health HealthStream provides learning and information services primarily in the Description information services to consumers, research solutions for the healthcare mobile space to 1.4 million physician physicians and employers. industry. members. LTM Revenues (000s) $534,113 $111,700 $87,234 LTM EBITDA (000s ) $154,631 $9,503 $17,865 A EV / LTM EBITDA 5.8x 11.7x 25.5x A EV / LTM Revenues 1.7x 1.0x 5.2x 5 Year Revenue CAGR 15% 15% 19% (A) As of close 05/15/2012 Source: Company 10Ks and 10Qs Not for Further Distribution Without My Express Consent
  • 16. Additional Upside Opportunities16   ~$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