Net Loss for WebMD Drops Below $1B in Q2

Online health care firm WebMD (Nasdaq: HLTH) said Thursday that its losses for the second quarter ending June 30th narrowed to 7 U.S. cents per share, compared to a loss of 9 cents per share in this year's first quarter.

WebMD's second-quarter loss of $23.8 million, excluding restructuring, integration and non-cash expenses, was enough to meet Wall Street expectations of 7 cents per share.

The company posted a net loss of $821.8 million, or $2.30 per share, down from a first quarter loss of $1.039 billion, or $2.91.

As of June 30th, WebMD had approximately $588.2 million in cash and short-term marketable securities, the company said.

"The results for the quarter reflect the continuing efforts to integrate the acquired companies and achieve the benefits originally contemplated by these acquisitions," said WebMD President Marv Rich. "We anticipate a continued decline in our operating expenses and remain confident that we will finish the year with a positive exit rate."

Revenues Down

WebMD's latest-quarter results included $11.2 million in charges for restructuring and the integration of acquired companies. The charges included payments made to customers of discontinued product lines and "stay put" arrangements for employees who were given future termination dates, the company said.

WebMD saw its revenues drop from the first quarter in all of its revenue categories except physician services, which remained unchanged at $65.1 million.

Revenues from WebMD's portal services dropped from $19.9 million in the first quarter to $15.9 million in the second. According to WebMD, the falling revenues were a result of a softening Internet advertising market and the deferral of certain advertising sponsorships until the fourth quarter of 2001.

WebMD also saw its miscellaneous product category revenues drop by $1.2 million. WebMD said the drop was the result of the company's ongoing efforts to phase out certain non-core product offerings.

What's Down, Doc?

Rich said that revenue expectations for the full year are predicted to fall in the range of $715 to $725 million. Rich said these numbers reflect an uncertain future economic climate for hospital-to-physician relationships and the economy's negative influence on the spending decisions of physicians.

WebMD's consolidation of duplicate transaction services offerings and the continued softness in the Internet advertising market will also have an impact on WebMD's annual revenues, Rich said.

However, WebMD was able to reduce its quarterly operating expenses from $228.1 million in the first quarter to $210.6 in Q2.

WebMD also revamped several of its major strategic alliances during the quarter, including those with America Online, Excite, VitalWorks and Practiceworks.

Rain on the Parade

Dampening WebMD's outlook recently was the filing of a class-action shareholder lawsuit against WebMD's IPO underwriters, Goldman Sachs and Morgan Stanley, in the U.S. District Court for Southern District of New York.

The suit -- the latest in a recent flurry of e-commerce shareholder lawsuits -- alleges that the registration statement and prospectus filed in connection with WebMD's initial public offering were materially false and misleading.

The suit also alleges that Goldman Sachs and Morgan Stanley allocated WebMD shares to certain IPO customers in exchange for those customers agreeing to purchase additional WebMD shares in the aftermarket at pre-determined prices.

It also alleges that the two financial service companies provided material portions of a restricted number of WebMD shares to investors who provided them with undisclosed commissions.