Note to the Blyth user

To whoever reading this as a template,

* Please note that for each DCF that you do, the breakdown of the line-items on the financial stateme
* Please consult SEC filings, Bloomberg, or Google/Yahoo! Finance to obtain financial statement data
* A rigorous DCF will further break down the conventional GAAP line items to incorporate even more

If you have any questions, please do not hesitate to contact a Director or your Portfolio Manager for

Happy modeling,
Andrew Han

DCF Dashboard
in $ mm's
Source 2013 10K SEC Filing, Google Finance, and Bloomberg

In blue are assumptions

Company WebMD
Ticker WBMD
Current Price $48.35
Terminal Growth Rate 2.00%
Market Risk Premium 6.00% NYU prof estimate. http://people.stern.nyu.edu/ad
Risk-Free Rate 2.30% 10-yr treasury. http://www.bloomberg.com/market
WACC 5.75%

Fair Price $ 44.05

Appreciation -8.89%

Thesis and Notes

Thesis Patent cliff that is facing many pharmaceutical companies will cause them to

Notes This is where you would note important assumptions that you've included in
 on the financial statements will vary from company to company and ought to be customized accordingly.
financial statement data.
o incorporate even more granular assumptions. We strongly suggest that you do so.

r Portfolio Manager for help.

people.stern.nyu.edu/adamodar/
bloomberg.com/markets/rates-bonds/government-bonds/us/

anies will cause them to slash marketing budgets, which poses a real threat to WebMD revenue.

that you've included in your model

ed accordingly.
Income Statement
in mms Historical Projected
2010 2011 2012 2013 2014

Public Portal Advertising and Sponsors 447 477.3 391.3 433.2 476.52
% change 6.78% -18.02% 10.71% 10.00%
Private Portal Services 87.6 81.5 78.5 82.1 86.21
% change -6.96% -3.68% 4.59% 5.00%
Revenue 534.6 558.77 469.87 515.29 562.73
% change 4.52% -15.91% 9.67% 9.21%

COGS 187.83 201.68 216.36 209.74 230.72

% revenue 35.13% 36% 46% 41% 41%

Gross Profit 346.77 357.09 253.51 305.55 332.01

% gross margin 64.87% 64% 54% 59% 59%

Sales & Marketing 120.87 124.33 127.66 128.00 140.68

% revenue 22.61% 22.25% 27.17% 24.84% 25.00%
General & Administrative 85.50 91.27 97.62 93.22 90.04
% revenue 15.99% 16.33% 20.78% 18.09% 16.00%
SGA 206.37 215.60 225.28 221.22 230.72
% revenue 38.60% 38.58% 47.94% 42.93% 41.00%

R&D 0.00 0.00 0.00 0.00 0.00

D&A 27.58 26.80 28.40 26.61 28.00

% revenue 5.16% 4.80% 6.04% 5.16% 4.98%

EBITDA 140.40 141.49 28.23 84.33 101.29

EBIT, or Operating Income 112.82 114.69 -0.17 57.73 73.29

Interest Income 3.95 0.11 0.09 0.08 0.08

Interest Expense 11.45 20.65 23.33 22.83 22.83
Net Loss (Gain) from Interest 7.50 20.53 23.25 22.75 22.75

Loss (Gain) on Convertible Notes 23.33 0.00 0.00 4.87

Gain (Loss) on Investments 9.52 -18.52 -8.07 0.00
Restructuring 0.00 0.00 7.58 0.00
Transaction, severance, and other ex 0.07 2.33 2.30 1.35
Unusual Expenses 32.92 -16.19 1.80 6.22 2

Earnings Before Taxes (EBT) 72.40 110.35 -25.22 28.75 48.54

Tax 20.04 46.17 -2.13 13.64 17.22
% tax rate 14.28% 32.63% 0.00% 16.17% 17.00%

Extraordinary Items -1.8 -10.4 -2.7 0 0

Net Income 54.2 74.6 -20.4 15.1 31.3

Projected
2015 2016 2017 2018

524.17 576.59 634.25 697.67

10.00% 10.00% 10.00% 10.00%
90.52 95.04 99.79 104.78
5.00% 5.00% 5.00% 5.00%
614.69 671.63 734.04 802.46
9.23% 9.26% 9.29% 9.32%

252.02 275.37 300.96 329.01

41% 41% 41% 41%

362.67 396.26 433.08 473.45

59% 59% 59% 59%

153.67 167.91 183.51 200.61

25.00% 25.00% 25.00% 25.00%
98.35 107.46 124.79 136.42
16.00% 16.00% 17.00% 17.00%
252.02 275.37 308.30 337.03
41.00% 41.00% 42.00% 42.00%

0.00 0.00 0.00 0.00

28.00 28.00 28.00 28.00

4.56% 4.17% 3.81% 3.49%

110.64 120.89 124.79 136.42

82.64 92.89 96.79 108.42

0.08 0.08 0.08 0.08

22.83 22.83 22.83 22.83
22.75 22.75 22.75 22.75

2 2 2 2

57.89 68.14 72.04 83.67

 18.81 20.55 21.21 23.19
17.00% 17.00% 17.00% 17.00%

0 0 0 0

39.1 47.6 50.8 60.5

Notes
In blue are projections, highlighted in grey are assumptions

These are WebMD specific revenue segments. Ideally you want to break it out for your company

This way it's a lot more granular than just projecting out total revenue
I obviously didn't incorporate great assumptions (10% and 5%)
Of course, revenue segment data is a lot harder to find. Dig in the SEC filings or go to the Bloomberg

Since it's September 2014 when I'm putting this together, two quarters have already passed in 2014.

Assumption: they will need to increase marketing to drive advertising revenue to compete with FB an

Keeping this constant; fairly conservative given past numbers

Keeping this constant as an assumption

Struck out all of this because these are unusual expenses difficult to forecast individiually

"Unusual expenses" are not really common

In general, recurring "unusual expenses" is a red flag for value investors

Tax rate is zero if earnings are negative

Literally "extraordinary" so don't bother modeling it out unless there's some semblance of a recurrin
t out for your company

ngs or go to the Bloomberg terminals

ave already passed in 2014. YTD information can help guide annual projections. Use common sense and compa

enue to compete with FB and the like

ast individiually
me semblance of a recurring nature. Pretty much here only to reconcile historical income statements
mon sense and compare your assumptions against YTD performance.
statements
Balance Sheet
in $ mms Historical Projected
2010 2011 2012 2013 2014 2015

Accounts Receivable 134.45 121.33 106.62 124.23 121.66 118.46

Inventory 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Payable 0.00 0.00 0.00 0.00 0.00 0.00
Working Capital 134.45 121.33 106.62 124.23 121.66 118.46

Change in Working Capital 13.12 14.71 -17.61 2.57 3.20

2016 2017 2018 Notes

117.74 120.52 119.60 Crude approximation through averaging

0.00 0.00 0.00 There is no inventory, I'm guessing, because WebMD is a softwar
0.00 0.00 0.00 Guess they don't have short-term debt either…
117.74 120.52 119.60

0.72 -2.78 0.93 The working capital calculation is supposed to be non-cash work
which is calculated as AR - AP + Inventory.

Note, this is different from the numbers you'd find on Google or Y

and also different from the general definition of "current assets -

The motivation for this is that we want to use non-cash working c

cause WebMD is a software company and therefore doesn't have actual goods to sell

osed to be non-cash working capital.

s you'd find on Google or Yahoo Finance

finition of "current assets - current liabilities"

to use non-cash working capital.

FCF Calculation
in mms Historical Projected
2011 2012 2013 2014 2015 2016

Net Income 74.6 -20.4 15.1 31.3 39.1 47.6

D&A 26.8 280.4 26.61 28.00 28.00 28.00
Changes in Operating Working C 13.12 14.71 -17.61 2.57 3.20 0.72
CapEx 20.91 35.17 22.34 26.14 26.14 27.45

FCF 67.35 210.14 36.99 30.61 37.75 47.43

2017 2018 Notes

50.8 60.5
28.00 28.00 Naively keeping it constant for now; you'd want to inform these decisions
-2.78 0.93
25.52 26.31 Rolling average assumption

56.09 61.24
nform these decisions more
Fair Value Calculation
all numbers in mm's
2011 2012 2013 2014 2015 2016 2017
Projected Year 1 2 3 4
FCF 67.35 210.14 36.99 30.61 37.75 47.43 56.09
Discount Factor 1.06 1.12 1.18 1.25
Discounted 28.95 33.76 40.11 44.85

Enterprise Value 1861.53

Net Debt 170.92
Fair Value ###

WACC Assumptions
WACC 5.75%

Amount Weight Notes

Equity 148.47 0.13
Debt 952.23 0.87

Beta 0.82 (Yahoo! Finance), although you should try calculati

Rm-Rf 3.70%
Cost of Equity 5.33%

Cost of Debt 7.00%

Tax Rate 17.00%
After Tax Cost of De 5.81%

Shares Outstanding 38.38

 2018 Terminal
5 5
61.24 61.24
1.32 0.04
46.31 1667.56

h you should try calculating it yourself