##### Table of Contents



UNITED
    STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
    Form 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the
    quarterly period ended March 31,
    2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to   Commission File
    Number: 0-51547
      WEBMD HEALTH CORP.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State of
    incorporation)

20-2783228(I.R.S. Employer
    Identification No.)111 Eighth Avenue
    New York, New York(Address of principal
    executive office)

10011(Zip
    code)   (212) 624-3700 (Registrants
    telephone number including area code)
        þ o
  Regulation S-T
  o o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2
  o þ




---



##### 



WEBMD
    HEALTH CORP.
    QUARTERLY REPORT ON
    FORM 10-Q
    For the period ended March 31, 2010
    TABLE OF CONTENTS
   
 PageNumberForward-Looking Statements


3PART I

Financial InformationItem 1.

Financial Statements:Consolidated Balance Sheets as of March 31,
    2010 (unaudited) and December 31, 2009


4Consolidated Statements of Operations for the
    three months ended March 31, 2010 and 2009 (unaudited)


5Consolidated Statements of Cash Flows for the
    three months ended March 31, 2010 and 2009 (unaudited)


6Notes to Consolidated Financial Statements


7Item 2.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


25Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


57Item 4.

Controls and Procedures


57PART II

Other Information


58Item 1.

Legal Proceedings


58Item 1A.

Risk Factors


58Item 2.

Unregistered Sales of Equity Securities and Use
    of Proceeds


59Item 6.

Exhibits


59Signatures


60Exhibit Index


E-1EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1    ® ® ® ® ® ® ® ® ® ® ®
 2




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##### Table of Contents



FORWARD-LOOKING
    STATEMENTS  Form 10-Q
    
    failure to achieve sufficient levels of usage of our public and
    private portals;
    the inability to successfully deploy new or updated applications
    or services;
    competition in attracting consumers and healthcare professionals
    to our public portals and competition for advertisers and
    sponsors for our public portals;
    events or conditions that have a negative effect on promotional
    or educational spending by pharmaceutical and biotechnology
    companies or on the portion of that spending used for
    Internet-based services like ours;
    the inability to attract and retain qualified personnel;
    adverse economic conditions and disruptions in the capital
    markets;
    adverse changes in general business or regulatory conditions
    affecting the healthcare, information technology and Internet
    industries; and
    the other risks and uncertainties described in this Quarterly
    Report on
    Form 10-Q
    under the heading Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations  Factors That May Affect Our Future
    Financial Condition or Results of Operations.    Form 10-Q
 3




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##### Table of Contents



PART I
    FINANCIAL INFORMATION  ITEM 1.
    Financial
    Statements  WEBMD
    HEALTH CORP.CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share
    data)
  March 31,


December 31,2010


2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
450,214


$
459,766Accounts receivable, net of allowance for doubtful accounts of
    $1,481 at March 31, 2010 and $1,511 at December 31,
    2009


120,584



118,155Prepaid expenses and other current assets


15,697



11,419Investments


357,342



9,932Total current assets


943,837



599,272Investments






338,446Property and equipment, net


49,369



52,194Goodwill


202,104



202,104Intangible assets, net


24,943



26,020Deferred tax assets


75,477



50,789Other assets


18,567



19,723TOTAL ASSETS

$
1,314,297


$
1,288,548LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accrued liabilities

$
48,173


$
63,721Deferred revenue


120,139



98,4741.75% convertible subordinated notes due 2023


264,583



264,583Deferred tax liability


6,731



12,955Liabilities of discontinued operations


25,965



34,197Total current liabilities


465,591



473,93031/8%
    convertible notes due 2025, net of discount of $12,151 at
    March 31, 2010 and $22,641 at December 31, 2009


134,915



227,659Other long-term liabilities


21,931



22,191Commitments and contingenciesStockholders equity:Preferred stock, 50,000,000 shares authorized; no shares
    issued and outstanding






Common stock, $0.01 par value per share,
    650,000,000 shares authorized; 57,249,927 shares
    issued at March 31, 2010 and 57,243,710 shares issued
    at December 31, 2009


572



572Additional paid-in capital


9,394,123



9,469,857Treasury stock, at cost; 1,869,489 shares at March 31,
    2010 and 6,296,944 shares at December 31, 2009


(69,720
)


(233,651
)Accumulated deficit


(8,638,375
)


(8,634,585
)Accumulated other comprehensive income (loss)


5,260



(37,425
)Stockholders equity


691,860



564,768TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
1,314,297


$
1,288,548    4




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##### Table of Contents



WEBMD
    HEALTH CORP.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (In thousands, except per share data,
    unaudited)
  Three Months Ended March 31,2010


2009Revenue

$
108,030


$
90,264Cost of operations


42,994



36,565Sales and marketing


28,407



27,561General and administrative


18,809



21,848Depreciation and amortization


7,015



7,103Interest income


3,409



2,262Interest expense


5,139



6,536(Loss) gain on convertible notes


(3,727
)


6,647Loss on auction rate securities


28,848



Other expense, net


298



269Loss from continuing operations before income tax benefit


(23,798
)


(709
)Income tax benefit


20,008



1,217Consolidated (loss) income from continuing operations


(3,790
)


508Consolidated income from discontinued operations, net of tax
    provision of $1,059 in 2009






517Consolidated net (loss) income inclusive of noncontrolling
    interest


(3,790
)


1,025Income attributable to noncontrolling interest






(610
)Net (loss) income attributable to Company stockholders

$
(3,790
)

$
415Amounts attributable to Company stockholders:Loss from continuing operations

$
(3,790
)

$
(194
)Income from discontinued operations






609Net (loss) income attributable to Company stockholders

$
(3,790
)

$
415Basic and diluted (loss) income per common share:Loss from continuing operations

$
(0.07
)

$
(0.00
)Income from discontinued operations






0.01Net (loss) income attributable to Company stockholders

$
(0.07
)

$
0.01Weighted-average shares outstanding used in computing per share
    amounts:Basic and diluted


52,191



45,217  5




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##### Table of Contents



WEBMD
    HEALTH CORP.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (In thousands, unaudited)
  Three Months Ended March 31,2010


2009Cash flows from operating activities:Consolidated net (loss) income inclusive of noncontrolling
    interest

$
(3,790
)

$
1,025Adjustments to reconcile consolidated net (loss) income
    inclusive of noncontrolling interest to net cash provided by
    (used in) operating activities:Consolidated income from discontinued operations, net of tax






(517
)Depreciation and amortization


7,015



7,103Non-cash interest


2,090



2,799Non-cash advertising






1,753Non-cash stock-based compensation


7,837



9,154Deferred income taxes


(21,463
)


(2,604
)Loss (gain) on convertible notes


3,727



(6,647
)Loss on auction rate securities


28,848



Changes in operating assets and liabilities:Accounts receivable


(2,429
)


2,247Prepaid expenses and other, net


(1,829
)


(1,224
)Accrued liabilities and other long-term liabilities


(14,224
)


(20,741
)Deferred revenue


21,665



4,961Net cash provided by (used in) continuing operations


27,447



(2,691
)Net cash (used in) provided by discontinued operations


(8,233
)


2,001Net cash provided by (used in) operating activities


19,214



(690
)Cash flows from investing activities:Proceeds from sales of
    available-for-sale
    securities


4,500



600Purchases of property and equipment


(3,114
)


(5,309
)Finalization of sale price of discontinued operations


(1,430
)


250Net cash used in continuing operations


(44
)


(4,459
)Net cash used in discontinued operations






(829
)Net cash used in investing activities


(44
)


(5,288
)Cash flows from financing activities:Proceeds from issuance of common stock, net of cash used for
    employee withholding taxes


5,775



7,041Repurchases of convertible notes


(22,565
)


(78,183
)Purchase of treasury stock under repurchase program


(6,527
)


Payment for shares tendered in 2009, delivered in 2010


(6,818
)


Tax benefit on stock-based awards


1,413



Net cash used in financing activities


(28,722
)


(71,142
)Effect of exchange rates on cash






(245
)Net decrease in cash and cash equivalents


(9,552
)


(77,365
)Cash and cash equivalents at beginning of period


459,766



629,848Cash and cash equivalents at end of period

$
450,214


$
552,483  6




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data,
    unaudited)
  1.
    Summary
    of Significant Accounting Policies  Background
    and Basis of Presentation
    e-newsletters e-detailing WebMD the Magazine
     7




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Interim
    Financial Statements
    Form 10-K
  Seasonality
    Accounting
    Estimates
   8




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Net
    Income (Loss) Per Common Share
    Three Months Ended March 31,2010


2009Amounts Attributable to Company Stockholders:Numerator:Loss from continuing operations  Basic and diluted

$
(3,790
)

$
(194
)Income from discontinued operations, net of tax 
    Basic and
    Diluted(1)

$



$
602Denominator:Weighted-average shares  Basic and diluted


52,191



45,217Basic and diluted (loss) income per common share:Loss from continuing operations

$
(0.07
)

$
(0.00
)Income from discontinued operations






0.01Net (loss) income attributable to Company stockholders

$
(0.07
)

$
0.01     (1)
    
    Income from discontinued operations
    was adjusted for the effect of participating non-vested
    restricted stock of $7 in 2009.   9




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended March 31,2010


2009Options, restricted stock and warrants


16,928



19,566Convertible notes


11,839



15,94828,767



35,514   Recent
    Accounting Pronouncements
  Accounting
    Pronouncements to be Adopted in the Future
    Reclassifications
    2.
    Discontinued
    Operations  Porex
   10




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Revenue

$
18,253Earnings before taxes


2,400   Little
    Blue Book Print Directory Business
    Revenue

$
572Losses before taxes


715   EPS
   11




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Repurchase
    and Conversion of Convertible Notes  1 8 1 8 1 8
  1 8 1 8 1 8
  1 8
  4.
    Related
    Party Transaction  Fidelity
    Human Resources Services Company LLC
    5.
    Fair
    Value of Financial Instruments and Non-Recourse Credit
    Facilities   12




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Level 1:
    Observable inputs such as quoted market prices in active markets
    for identical assets or liabilities.Level 2:
    Observable market-based inputs or unobservable inputs that are
    corroborated by market data.Level 3:
    Unobservable inputs for which there is little or no market data,
    which require the use of the reporting entitys own
    assumptions.    March 31, 2010

December 31, 2009Fair Value

Amortized



Gross

Amortized



GrossEstimate

Cost

Fair

Unrealized

Cost



UnrealizedUsing:

Basis

Value

Gains

Basis

Fair Value

Gains (Losses)Cash and cash equivalents


Level 1


$
450,214


$
450,214


$



$
459,766


$
459,766


$
Equity securities


Level 1



1,470



5,368



3,898



1,470



4,851



3,381Auction rate
    securities(1)


Level 3



286,499



286,499







320,507



279,701



(40,806
)(2)Senior secured
    notes(3)


Level 3



64,113



65,475



1,362



63,826



63,826



     (1)
    
    The face (par) value of the auction
    rate securities was $348,200 and $352,700 as of March 31,
    2010 and December 31, 2009, respectively.(2)
    
    Amounts reflect cumulative effect
    of adoption of new authoritative guidance as discussed below.(3)
    
    The face value of the senior
    secured notes was $67,500 as of March 31, 2010 and
    December 31, 2009.    Three Months Ended March 31,2010


2009Auction Rate


Senior


Auction RateSecurities


Secured Notes


SecuritiesFair value as of the beginning of the period

$
279,701


$
63,826


$
286,552Redemptions


(4,500
)






(600
)Loss included in earnings


(29,508
)






Interest income accretion included in earnings






287



Changes in unrealized gains/losses included in other
    comprehensive income (loss)


40,806



1,362



(11,883
)Fair value as of the end of the period

$
286,499


$
65,475


$
274,069    13




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  other-than-temporary
  other-than-temporary other-than-temporary other-than-temporarily other-than-temporarily other-than-temporary
       14




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    other-than-temporary
        March 31, 2010

December 31, 2009Carrying Amount

Fair Value

Carrying Amount

Fair Value1.75% Notes(a)

$
264,583


$
351,448


$
264,583


$
296,00231/8% Notes(a)


134,915



192,656



227,659



284,716     (a)
    
    Fair value estimate incorporates
    bid price quotes.  Non-Recourse
    Credit Facilities
   15




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    6.
    Equity    Three Months Ended March 31, 2009Stockholders


Noncontrolling


TotalEquity


Interest


EquityBalance as of the beginning of period

$
496,698


$
134,223


$
630,921Comprehensive loss:Net income


415



610



1,025Net change in unrealized losses on securities


(10,583
)


(981
)


(11,564
)Foreign currency translation adjustment


(718
)






(718
)Total comprehensive loss


(10,886
)


(371
)


(11,257
)Issuance of stock for option exercises and other issuances


5,214



1,827



7,041Stock-based compensation expense


3,967



5,412



9,379Repurchases of
    31/8%
    convertible notes, net of tax


(989
)






(989
)Balance as of the end of period

$
494,004


$
141,091


$
635,095   7.
    Comprehensive
    Income (Loss)    March 31,2010


2009Foreign currency translation gains

$



$
(718
)Unrealized gains (losses) on securities:Unrealized holding gains (losses)


13,837



(10,583
)Unrealized losses recognized in earnings


28,848



Other comprehensive income (loss)


42,685



(11,301
)Net (loss) income


(3,790
)


415Comprehensive income (loss)

$
38,895


$
(10,886
)   8.
    Stock
    Repurchase Program and 2010 Tender Offer   16




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      9.
    Intangible
    Assets    March 31, 2010


December 31, 2009Weighted











WeightedGross








Average


Gross








AverageCarrying


Accumulated





Remaining


Carrying


Accumulated





RemainingAmount


Amortization


Net


Useful Life(a)


Amount


Amortization


Net


Useful Life(a)Content

$
15,954


$
(15,608
)

$
346



0.8


$
15,954


$
(15,482
)

$
472



1.0Customer relationships


34,057



(17,191
)


16,866



8.2



34,057



(16,374
)


17,683



8.3Technology and patents


14,700



(14,700
)










14,700



(14,700
)






Trade names-definite lives


6,030



(2,763
)


3,267



6.2



6,030



(2,629
)


3,401



6.4Trade names-indefinite lives


4,464







4,464



n/a



4,464







4,464



n/aTotal

$
75,205


$
(50,262
)

$
24,943






$
75,205


$
(49,185
)

$
26,020     (a)
    
    The calculation of the weighted
    average remaining useful life is based on the net book value and
    the remaining amortization period of each respective intangible
    asset.    Year Ending December 31:2010 (April 1st to December 31st)

$
2,3172011


2,6272012


2,6272013


2,6272014


2,627Thereafter


7,654   10.
    Commitments
    and Contingencies  Roger H.
    Kaye and Roger H. Kaye, MD PC v. WebMD, LLC, et
    al.
   17




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Porex
    Corporation v. Kleanthis Dean Haldopoulos, Benjamin T.
    Hirokawa and Micropore Plastics, Inc.
    Investigations
    by United States Attorney for the District of South Carolina and
    the SEC
     18




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Directors &
    Officers Liability Insurance Coverage Litigation
  and/or
   19




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        agreed-upon
   20




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Other
    Legal Proceedings
  Form 10-K,
  11.
    Stock-Based
    Compensation     21




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Options
    WeightedWeighted

AverageAverage

Remaining

AggregateExercise Price

Contractual Life

IntrinsicShares

per Share

(In Years)

Value(1)Outstanding at January 1, 2010


22,428,953


$
29.67Granted


424,300



41.30Exercised


(5,768,232
)


27.70Cancelled


(1,138,691
)


71.13Outstanding at March 31, 2010


15,946,330


$
27.73



6.1


$
301,261Vested and exercisable at the end of the period


9,729,503


$
28.05



4.4


$
181,366     (1)
    
    The aggregate intrinsic value is
    based on the market price of the Companys common stock on
    March 31, 2010, which was $46.38, less the applicable
    exercise price of the underlying option. This aggregate
    intrinsic value represents the amount that would have been
    realized if all the option holders had exercised their options
    on March 31, 2010.    Three Months EndedMarch 31,2010


2009Expected dividend yield


0.0
%


0
.0%Expected volatility


0.25



0
.38-.057Risk-free interest rate


1.61
%


1
.36%Expected term (years)


3.4



3
.5Weighted average fair value of options granted during the year

$
8.52


$
8
.86  22




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Restricted
    Stock Awards
    WeightedAverageGrant DateShares

Fair ValueBalance as of January 1, 2010


1,106,124


$
27.51Granted


13,080



41.18Vested


(132,638
)


25.01Forfeited


(4,481
)


22.84Balance as of March 31, 2010


982,085


$
28.05       Other
   23




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##### Table of Contents



WEBMD
    HEALTH CORP.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Summary
    of Stock-Based Compensation Expense
    Three Months EndedMarch 31,2010


2009Plans:Stock options

$
5,735


$
6,616Restricted stock


1,958



2,767Other


144



88Total stock-based compensation expense

$
7,837


$
9,471Included in:Cost of operations

$
1,789


$
1,623Sales and marketing


2,193



1,550General and administrative


3,855



5,981Consolidated income from continuing operations


7,837



9,154Consolidated income from discontinued operations






317Total stock-based compensation expense

$
7,837


$
9,471       12.
    Other
    Expense, Net    Three Months EndedMarch 31,2010


2009Transition service fees(a)

$



$
64Reduction of tax contingencies(b)


178



245Legal expense(c)


(476
)


(578
)Other expense, net

$
(298
)

$
(269
)     (a)
    
    Represents the net fees received
    from ViPS and EBSCo (businesses previously sold by the Company)
    in relation to their respective transition services agreements.(b)
    
    Represents the reduction of certain
    sales and use tax contingencies resulting from the expiration of
    various statutes.(c)
    
    Represents the costs and expenses
    incurred by the Company related to the investigation by the
    United States Attorney for the District of South Carolina and
    the SEC and the related Coverage Litigation. 24




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##### Table of Contents



ITEM 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  This Item 2 contains forward-looking statements with
    respect to possible events, outcomes or results that are, and
    are expected to continue to be, subject to risks, uncertainties
    and contingencies, including those identified in this Item. See
    Forward-Looking Statements on page 3.
  Overview
    
    Introduction.  This section provides a general
    description of our company, background information on certain
    trends, transactions and other developments affecting our
    company and a discussion of how seasonal factors may impact the
    timing of our revenue.
    Critical Accounting Policies and
    Estimates.  This section discusses those
    accounting policies that are considered important to the
    evaluation and reporting of our financial condition and results
    of operations, and whose application requires us to exercise
    subjective and often complex judgments in making estimates and
    assumptions. In addition, all of our significant accounting
    policies, including our critical accounting policies, are
    summarized in Note 2 to the Consolidated Financial
    Statements contained in our Annual Report on
    Form 10-K
    for the year ended December 31, 2009 filed with the
    Securities and Exchange Commission (which we refer to as the
    SEC).
    Recent Accounting Pronouncements.  This section
    provides a summary of the most recent authoritative accounting
    standards and guidance that have either been recently adopted by
    our company or may be adopted in the future.
    Results of Operations and Supplemental Financial and
    Operating Information.  These sections provide our
    analysis and outlook for the significant line items on our
    statements of operations, as well as other information that we
    deem meaningful to understand our results of operations on a
    consolidated basis.
    Liquidity and Capital Resources.  This section
    provides an analysis of our liquidity and cash flows, as well as
    a discussion of our commitments that existed as of
    March 31, 2010.
    Factors That May Affect Our Future Financial Condition or
    Results of Operations.  This section describes
    circumstances or events that could have a negative effect on our
    financial condition or results of operations, or that could
    change, for the worse, existing trends in some or all of our
    businesses. The factors discussed in this section are in
    addition to factors that may be described elsewhere in this
    Quarterly Report.    Introduction
  Our
    Company
  e-newsletters
 25




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##### Table of Contents



e-detailing WebMD the Magazine
  Background
    Information on Certain Trends Influencing the Use of Our
    Services
    
    Use of the Internet by Consumers and
    Physicians.  The Internet has emerged as a major
    communications medium and has already fundamentally changed many
    sectors of the economy, including the marketing and sales of
    financial services, travel, and entertainment, among others. The
    Internet is also changing the healthcare industry and has
    transformed how consumers and physicians find and utilize
    healthcare information.  
    Healthcare consumers increasingly seek to educate themselves
    online about their healthcare related issues, motivated in part
    by the continued availability of new treatment options and in
    part by the larger share of healthcare costs they are being
    asked to bear due to changes in the benefit designs being
    offered by health plans and employers. The Internet has
    fundamentally changed the way consumers obtain health and
    wellness information, enabling them to have immediate access to
    searchable information and dynamic interactive content to check
    symptoms, assess risks, understand diseases, find providers and
    evaluate treatment options. According to a study of health
    information technology by the National Center for Health
    Statistics of the Centers for Disease Control and Prevention (or
    CDC), approximately 51% of United States adults aged
    18-64 had
    used the Internet to look up health information during the prior
    12 months, based on a survey conducted in the first half of
    2009. According to a June 2009 study by the Pew
    Internet & American Life Project, 61% of
    U.S. adults have searched for health information on the
    Internet (compared to 25% in a similar study in 2000) and
    approximately 37% of U.S. adults have accessed social media
    related to health.
    The Internet has also become a primary source of information for
    physicians seeking to improve clinical practice and is growing
    relative to traditional information sources, such as
    conferences, meetings and offline journals.  
    Increased Online Marketing and Education Spending for
    Healthcare Products.  Pharmaceutical,
    biotechnology and medical device companies spend large amounts
    each year marketing their products and educating consumers and
    physicians about them; however, only a small portion of this
    amount is currently spent on online services. We believe that
    these companies, which comprise the majority of the advertisers
    and sponsors of our public portals, are becoming increasingly
    aware of the effectiveness of the Internet relative to
    traditional media in providing health, clinical and
    product-related information to consumers and physicians, and
    this increasing awareness will result in increasing demand for
    our services. However, notwithstanding our general expectation
    for increased demand, our advertising and sponsorship revenue
    may vary significantly from quarter to quarter due to a number
    of factors, including general economic conditions and the
    following:  
    The majority of our advertising and sponsorship contracts are
    for terms of approximately four to twelve months. We have
    relatively few longer term advertising and sponsorship contracts. 26




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##### Table of Contents




    The time between the date of initial contact with a potential
    advertiser or sponsor regarding a specific program and the
    execution of a contract with the advertiser or sponsor for that
    program may be subject to delays over which we have little or no
    control, including as a result of budgetary constraints of the
    advertiser or sponsor or their need for internal approvals.    
    Changes in Health Plan Design; Health Management
    Initiatives.  In a healthcare market where a
    greater share of the responsibility for healthcare costs and
    decision-making has been increasingly shifting to consumers, use
    of information technology (including personal health records) to
    assist consumers in making informed decisions about healthcare
    has also increased. We believe that through our WebMD Health and
    Benefits Manager tools, including our personal health record
    application, we are well positioned to play a role in this
    environment. However, our strategy depends, in part, on
    increasing usage of our private portal services by our employer
    and health plan clients employees and members,
    respectively. Increasing usage of our services requires us to
    continue to deliver and improve the underlying technology and
    develop new and updated applications, features and services. In
    addition, we face competition in the area of healthcare
    decision-support tools and online health management applications
    and health information services. Many of our competitors have
    greater financial, technical, product development, marketing and
    other resources than we do, and may be better known than we are.
    We also expect that, for clients and potential clients that have
    been adversely affected by general economic conditions, we may
    continue to experience some reductions in initial contracts,
    contract expansions and contract renewals for our private portal
    services, as well as reductions in the size of existing
    contracts.
    Developments in Social Media and Other Internet
    Applications.  In the past several years, video
    and multimedia applications have become an increasingly
    important part of what users expect from Internet sites. In
    addition, consumers are increasingly using the Internet to
    access social media as a means to communicate and exchange
    information, including regarding health and wellness. Similarly,
    physicians and other healthcare professionals are increasingly
    participating in condition or topic specific community groups
    and other interactive applications. Consumers and healthcare
    professionals are also increasingly using handheld devices to
    access the Internet, with physicians increasingly using handheld
    devices in diagnosis and treatment at the point of care. We have
    invested and intend to continue to invest in software and
    systems that allow us to meet the demands of our users and
    sponsors, including customized content management and publishing
    technology to deliver interactive content, multimedia
    programming and personalized health applications that engage our
    users. The following are some of our recent and current
    initiatives to improve the user experience on our Web sites,
    expand our services and increase our user base:  
    Physician Connect, our social networking platform for
    physicians, allows them to exchange information online on a
    range of topics, including patient care, drug information,
    healthcare-related legislation and practice management.
    Physicians can also create polls to elicit tailored,
    constructive feedback from other physicians. We also offer third
    parties the opportunity to sponsor Physician Connect discussions
    and polls so that they can gain insights into physicians
    perspectives and areas of interest. By the end of 2009,
    Physician Connect had attracted more than 120,000 physician
    members. Medscape from WebMD also offers a variety of
    sponsored and unsponsored blogs where healthcare professionals
    can share their thoughts and opinions with the Medscape from
    WebMD community. 27




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
    In March 2010, we launched the WebMD Health Exchange, a social
    networking initiative that gives consumers the ability to
    connect with health experts and with other WebMD members to
    exchange real experiences, discuss personal challenges, and
    receive direct answers and support. The WebMD Health Exchange is
    being integrated throughout each of the core content areas of
    WebMD.com, giving members the ability to safely and easily
    connect with others on topics that are most relevant to them. In
    addition to expert-led communities, members are empowered to
    create their own communities and to exchange information with
    other users. The WebMD Health Exchange will also enable third
    party sponsors to create branded exchanges and to host consumer
    discussions on specific health and wellness topics most
    important to them.
    Medscape Mobile is a free medical application that includes
    Medscapes specialty-specific news, comprehensive drug
    information and clinical reference tools. Medscape Mobile also
    includes CME activities organized by specialty and designed for
    use on a mobile device. Medscape Mobile has attracted over
    275,000
    iPhone®

    and iPod
    touch®

    users since its launch in 2009. In April 2010, Medscape Mobile
    was launched on the
    Blackberry®

    platform.
    WebMD Mobile is a free consumer application that allows
    consumers to access certain WebMD tools on an iPhone, including
    Symptom Checker, First Aid, and Pill Identifier applications, as
    well as other health information. It has been downloaded nearly
    1.6 million times since launch and is the leading free
    health application in the iTunes Store.
    We are pursuing opportunities to expand the reach of our brands
    outside the United States. In October 2009, we launched our
    first major consumer portal outside the United States in
    partnership with Boots, the UKs leading pharmacy-led
    health and beauty retailer.  
    Healthcare Reform Legislation.  The Patient
    Protection and Affordable Care Act, as amended by the Health
    Care and Education Reconciliation Act of 2010 (which we refer to
    as the Reform Legislation), was signed into law in March 2010.
    The Reform Legislation makes extensive changes to the current
    system of healthcare insurance and benefits. In general, the
    Reform Legislation seeks to reduce healthcare costs and decrease
    the number of uninsured legal U.S. residents, by among
    other things, requiring employers to offer, and individuals to
    carry, health insurance or be subject to penalties. The Reform
    Legislation also imposes new regulations on health insurers,
    including guaranteed coverage requirements, prohibitions on
    certain annual and all lifetime limits on amounts paid on behalf
    of or to plan members, increased restrictions on rescinding
    coverage, establishment of minimum medical loss ratio
    requirements, a requirement to cover preventive services on a
    first dollar basis, the establishment of state insurance
    exchanges and essential benefit packages, and greater
    limitations on how health insurers price certain of their
    products. The Reform Legislation also contains provisions that
    will affect the revenues and profits of pharmaceutical and
    medical device companies, including provisions affecting amounts
    paid by Medicare for their products. Many of the provisions of
    the Reform Legislation that expand insurance coverage will not
    become effective until 2014 and many provisions require
    implementing regulations and interpretive guidance to be issued
    before they will be fully implemented. In addition, it is
    difficult to foresee how individuals and businesses will respond
    to the choices available to them under the Reform Legislation.
    Furthermore, the Reform Legislation will result in future state
    legislative and regulatory changes, which we are unable to
    predict at this time, in order for states to comply with certain
    provisions of the Reform Legislation and to participate in
    grants and other incentive opportunities. Accordingly, while we
    do not currently anticipate any significant adverse effects on
    WebMD as a direct result of application of the Reform
    Legislation to our businesses or on our company in its capacity
    as an employer, we are unable to predict what the indirect
    impacts of the Reform Legislation will be on WebMDs
    businesses through its effects on other healthcare industry
    participants, including pharmaceutical and medical device
    companies that are advertisers and sponsors of our public
    portals and employers and health plans that are clients of our
    private portals. However, we believe that certain aspects of the
    Reform Legislation and future implementing regulations that seek
    to reduce healthcare costs may create opportunities for WebMD,
    including with respect to our personal health record
    applications and health and benefits decision-support tools and,
    more generally, with respect to our capabilities in providing
    health and wellness information and education. We cannot yet 28




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determine the scope of any such opportunities or what
    competition we may face in our efforts to pursue such
    opportunities.    Background
    Information on Certain Transactions and Other Significant
    Developments
  Merger with HLTH.
       29




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##### Table of Contents



Repurchase and Conversion of Convertible
    Notes. 1 8 1 8 1 8 1 8
  Tender Offers.
  Sale of Porex; Senior Secured Notes.
  Auction Rate Securities.
  Non-Recourse Credit Facilities.
  Directors & Officers Liability Insurance Coverage
    Litigation. and/or
 30




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##### Table of Contents



agreed-upon
 31




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Indemnification Obligations to Former Officers and Directors
    of EPS.
 32




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##### Table of Contents



Seasonality
    Critical
    Accounting Policies and Estimates
        
    Revenue Recognition.  Revenue from advertising
    is recognized as advertisements are delivered or as publications
    are distributed. Revenue from sponsorship arrangements, content
    syndication and distribution arrangements, information services
    and licenses of healthcare management tools and private portals
    as well as related health coaching services, are recognized
    ratably over the term of the applicable agreement. Revenue from
    the sponsorship of CME is recognized over the period we
    substantially complete our contractual deliverables as
    determined by the applicable agreements. When contractual
    arrangements contain multiple elements, revenue is allocated to
    each element based on its relative fair value determined using
    prices charged when elements are sold separately. In certain
    instances where fair value does not exist for all the elements,
    the amount of revenue allocated to the delivered elements equals
    the total consideration less the fair value of the undelivered
    elements. In instances where fair value does not exist for the
    undelivered elements, revenue is recognized when the last
    element is delivered.
    Long-Lived Assets.  Our long-lived assets
    consist of property and equipment, goodwill and other intangible
    assets. Goodwill and other intangible assets arise from the
    acquisitions we have made. The amount assigned to intangible
    assets is subjective and based on fair value using exit price
    and market 33




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##### Table of Contents



participant view, such as discounted cash flow and replacement
    cost models. Our long-lived assets, excluding goodwill and
    indefinite lived intangible assets, are amortized over their
    estimated useful lives, which we determine based on the
    consideration of several factors including the period of time
    the asset is expected to remain in service. We evaluate the
    carrying value and remaining useful lives of long-lived assets,
    excluding goodwill and indefinite lived intangible assets,
    whenever indicators of impairment are present. We evaluate the
    carrying value of goodwill and indefinite lived intangible
    assets annually, or whenever indicators of impairment are
    present. We use a discounted cash flow approach to determine the
    fair value of goodwill and indefinite lived intangible assets.
    Long-lived assets held for sale are reported at the lower of
    cost or fair value less cost to sell. There was no impairment of
    goodwill or indefinite lived intangible assets noted as a result
    of our impairment testing in 2009 for any of our continuing
    operations.  
    Fair Value of Investments.  Through
    April 20, 2010, we held investments in ARS which were
    backed by student loans, 97% guaranteed under the Federal Family
    Education Loan Program (FFELP), and had credit ratings of AAA or
    Aaa when purchased. Historically, the fair value of our ARS
    holdings approximated par value due to the frequent auction
    periods, generally every 7 to 28 days, which provided
    liquidity to these investments. However, since February 2008,
    all auctions involving these securities have failed. The result
    of a failed auction is that these ARS holdings will continue to
    pay interest in accordance with their terms at each respective
    auction date; however, liquidity of the securities will be
    limited until there is a successful auction, the issuer redeems
    the securities, the securities mature or until such time as
    other markets for our ARS holdings develop.      
    Stock-Based Compensation.  Effective
    January 1, 2006, we adopted authoritative guidance which
    requires all share-based payments to employees, including grants
    of employee stock options, to be recognized as compensation
    expense over the service period (generally the vesting period)
    in the consolidated financial statements based on their fair
    values. The fair value of each option granted is estimated on
    the date of grant using the Black-Scholes option pricing model.
    The assumptions used in this model are expected dividend yield,
    expected volatility, risk-free interest rate and expected term.
    Unvested stock options and restricted stock awards that were
    granted prior to January 1, 2006 continued to be accounted
    for using the same grant date fair value and same expense
    attribution method used under previously issued authoritative
    guidance, except that all awards are recognized in the results
    of operations over the remaining vesting periods. As of
    March 31, 2010, there was approximately $60.0 million
    of unrecognized stock-based compensation expense (net of
    estimated forfeitures) related 34




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to unvested stock options and restricted stock awards held by
    employees, which is expected to be recognized over a
    weighted-average period of approximately 3.0 years, related
    to our stock-based compensation plans.  
    Deferred Tax Assets.  Our deferred tax assets
    are comprised primarily of net operating loss carryforwards.
    These net operating loss carryforwards may be used to offset
    taxable income in future periods, reducing the amount of taxes
    we might otherwise be required to pay. A significant portion of
    our net deferred tax assets, including the portion related to
    excess tax benefits of stock-based awards, are reserved for by a
    valuation allowance as required by relevant accounting
    literature. The remaining portion of our net deferred tax assets
    are no longer reserved for by a valuation allowance. Management
    determines the need for a valuation allowance by assessing the
    probability of realizing deferred tax assets, taking into
    consideration factors including historical operating results,
    expectations of future earnings and taxable income. Management
    will continue to evaluate the need for a valuation allowance in
    the future.
    Tax Contingencies.  Our tax contingencies are
    recorded to address potential exposures involving tax positions
    we have taken that could be challenged by tax authorities. These
    potential exposures result from applications of various
    statutes, rules, regulations and interpretations. Our estimates
    of tax contingencies reflect assumptions and judgments about
    potential actions by taxing jurisdictions. We believe that these
    assumptions and judgments are reasonable. However, our accruals
    may change in the future due to new developments in each matter
    and the ultimate resolution of these matters may be greater or
    less than the amount that we have accrued. Consistent with our
    historical financial reporting, we have elected to reflect
    interest and penalties related to uncertain tax positions as
    part of the income tax provision.  Recent
    Accounting Pronouncements
  Accounting
    Pronouncements to be Adopted in the Future
   35




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Results
    of Operations
    Three Months Ended March 31,2010


2009$


%


$


%Revenue

$
108,030



100.0


$
90,264



100.0Cost of operations


42,994



39.8



36,565



40.5Sales and marketing


28,407



26.3



27,561



30.5General and administrative


18,809



17.4



21,848



24.2Depreciation and amortization


7,015



6.5



7,103



7.9Interest income


3,409



3.2



2,262



2.5Interest expense


5,139



4.8



6,536



7.2(Loss) gain on convertible notes


(3,727
)


(3.4
)


6,647



7.4Loss on auction rate securities


28,848



26.7







Other expense, net


298



0.3



269



0.3Loss from continuing operations before income tax benefit


(23,798
)


(22.0
)


(709
)


(0.7
)Income tax benefit


20,008



18.5



1,217



1.3Consolidated (loss) income from continuing operations


(3,790
)


(3.5
)


508



0.6Consolidated income (loss) from discontinued operations










517



0.6Consolidated net (loss) income inclusive of noncontrolling
    interest


(3,790
)


(3.5
)


1,025



1.2Income attributable to noncontrolling interest










(610
)


(0.7
)Net (loss) income attributable to Company stockholders

$
3,790



(3.5
)

$
415



0.5   e-detailing WebMD the
    Magazine
       36




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##### Table of Contents




    Non-cash advertising expense.  Expense related
    to the use of our prepaid advertising inventory that we received
    from News Corporation in exchange for equity instruments that we
    issued in connection with an agreement we entered into with News
    Corporation in 1999 and subsequently amended in 2000. This
    non-cash advertising expense is included in sales and marketing
    expense as we use the asset for promotion of our brand.
    Non-cash stock-based compensation
    expense.  Expense related to the awards of all
    share-based payments to employees and non-employee directors,
    such as grants of employee stock options and restricted stock.
    Non-cash stock-based compensation expense is reflected in the
    same expense captions as the related salary cost of the
    respective employee.    Three Months EndedMarch 31,2010


2009Advertising expense included in:Sales and marketing

$



$
1,753Stock-based compensation expense included in:Cost of operations

$
1,789


$
1,623Sales and marketing


2,193



1,550General and administrative


3,855



5,981Total stock-based compensation expense

$
7,837


$
9,154   Three
    Months Ended March 31, 2010 and 2009
    Revenue
    Costs and
    Expenses
  Cost of Operations.
  Sales and Marketing.
 37




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General and Administrative.
  Depreciation and Amortization.
  Interest Income.
  Interest Expense. 1 8 1 8
  Gain on Conversions and Repurchases of Convertible
    Notes. 1 8 1 8 1 8
  Other Expense, Net.
  Income Tax Benefit.
 38




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Income from Discontinued Operations, Net of
    Tax.
  Income Attributable to Noncontrolling
    Interest.
  Supplemental
    Financial and Operating Information
    Three Months Ended March 31,2010


2009RevenuePublic portal advertising and sponsorship

$
86,257


$
67,289Private portal services


21,773



22,975$
108,030


$
90,264Earnings before interest, taxes, non-cash and other items
    (Adjusted EBITDA)

$
25,657


$
15,261Interest, taxes, non-cash and other itemsInterest income


3,409



2,262Interest expense


(5,139
)


(6,536
)Income tax benefit


20,008



1,217Depreciation and amortization


(7,015
)


(7,103
)Non-cash stock-based compensation


(7,837
)


(9,154
)Non-cash advertising






(1,753
)(Loss) gain on convertible notes


(3,727
)


6,647Loss on auction rate securities


(28,848
)


Other expense, net


(298
)


(333
)Consolidated (loss) income from continuing operations


(3,790
)


508Consolidated income from discontinued operations, net of tax






517Consolidated net (loss) income inclusive of noncontrolling
    interest


(3,790
)


1,025Income attributable to noncontrolling interest






(610
)Net (loss) income attributable to Company stockholders

$
(3,790
)

$
415     Public Portal Advertising and
    Sponsorship.
  Private Portal Services.
 39




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##### Table of Contents



Adjusted EBITDA.
  Explanatory Note Regarding Adjusted
    EBITDA.  Adjusted EBITDA is a non-GAAP financial
    measure and should be viewed as supplemental to, and not as an
    alternative for, income (loss) from continuing
    operations or net income (loss) calculated in
    accordance with GAAP. Our management uses Adjusted EBITDA as an
    additional measure of performance for purposes of business
    decision-making, including developing budgets, managing
    expenditures, and evaluating potential acquisitions or
    divestitures.
    Period-to-period
    comparisons of Adjusted EBITDA help our management identify
    additional trends in financial results that may not be shown
    solely by
    period-to-period
    comparisons of income (loss) from continuing operations or net
    income (loss). In addition, we use Adjusted EBITDA in the
    incentive compensation programs applicable to many of our
    employees in order to evaluate our performance. We believe that
    the presentation of Adjusted EBITDA is useful to investors in
    their analysis of our results for reasons similar to the reasons
    why our management finds it useful and because it helps
    facilitate investor understanding of decisions made by our
    management in light of the performance metrics used in making
    those decisions. In addition, we believe that providing Adjusted
    EBITDA, together with a reconciliation of Adjusted EBITDA to
    income (loss) from continuing operations or to net income
    (loss), helps investors make comparisons between us and other
    companies that may have different capital structures, different
    effective income tax rates and tax attributes, different
    capitalized asset values
    and/or
    different forms of employee compensation. Please see the
    Explanation of Non-GAAP Financial Information
    filed as Exhibit 99.1 to this Quarterly Report for
    additional background information regarding our use of Adjusted
    EBITDA. Exhibit 99.1 is incorporated in this MD&A by
    this reference.
  Liquidity
    and Capital Resources
       40




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1 8 stock-based 1 8 stock-based
       41




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Factors
    That May Affect Our Future Financial Condition or Results of
    Operations
      Risks
    Related to Our Operations and the Healthcare Content We
    Provide
  If we are
    unable to provide content and services that attract and retain
    users to The WebMD Health Network on a consistent basis, our
    advertising and sponsorship revenue could be reduced
  The WebMD Health Network
  
    our ability to hire and retain qualified authors, journalists
    and independent writers;
    our ability to license quality content from third
    parties; and
    our ability to monitor and respond to increases and decreases in
    user interest in specific topics.  The WebMD Health Network The WebMD Health Network,
  Developing
    and implementing new and updated applications, features and
    services for our public and private portals may be more
    difficult than expected, may take longer and cost more than
    expected, and may not result in sufficient increases in revenue
    to justify the costs
   42




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##### Table of Contents



and/or
  We face
    significant competition for our healthcare information products
    and services
    
    Our public portals face competition from numerous other
    companies, both in attracting users and in generating revenue
    from advertisers and sponsors. We compete for users with online
    services and Web sites that provide health-related information,
    including both commercial sites and
    not-for-profit
    sites. We compete for advertisers and sponsors with:
    health-related Web sites; general purpose consumer Web sites
    that offer specialized health
    sub-channels;
    other high-traffic Web sites that include both
    healthcare-related and non-healthcare-related content and
    services; search engines that provide specialized health search;
    and advertising networks that aggregate traffic from multiple
    sites. Our public portals also face competition from offline
    publications and information services.
    Our private portals compete with: providers of healthcare
    decision-support tools and online health management
    applications, including personal health records; wellness and
    disease management vendors; and health information services and
    health management offerings of healthcare benefits companies and
    their affiliates.    Failure
    to maintain and enhance the WebMD brand could have a
    material adverse effect on our business
    Our
    online businesses have a limited operating history
   43




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Our
    failure to attract and retain qualified executives and employees
    may have a material adverse effect on our business
    The
    timing of our advertising and sponsorship revenue may vary
    significantly from quarter to quarter and is subject to factors
    beyond our control, including regulatory changes affecting
    advertising and promotion of drugs and medical devices and
    general economic conditions
      
    approval for new products or for new approved uses for existing
    products;
    the timing of FDA approval of generic products that compete with
    existing brand name products;
    the timing of withdrawals of products from the market;
    the timing of rollouts of new or enhanced services on our public
    portals;
    seasonal factors relating to the prevalence of specific health
    conditions and other seasonal factors that may affect the timing
    of promotional campaigns for specific products; and
    the scheduling of conferences for physicians and other
    healthcare professionals.  We may be
    unsuccessful in our efforts to increase advertising and
    sponsorship revenue from consumer products companies
   44




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##### Table of Contents



Lengthy
    sales and implementation cycles for our private online portals
    make it difficult to forecast our revenues from these
    applications and may have an adverse impact on our
    business
      Our
    ability to provide comparative information on hospital cost and
    quality depends on our ability to obtain the required data on a
    timely basis and, if we are unable to do so, our private portal
    services would be less attractive to clients
    Our
    ability to renew existing agreements with employers and health
    plans will depend, in part, on our ability to continue to
    increase usage of our private portal services by their employees
    and plan members
   45




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We may be
    subject to claims brought against us as a result of content we
    provide
      Expansion
    to markets outside the United States will subject us to
    additional risks
    
    challenges caused by language and cultural differences;
    difficulties in staffing and managing operations from a distance;
    uncertainty regarding liability for services and content;
    burdens of complying with a wide variety of legal, regulatory
    and market requirements;
    variability of economic and political conditions, including the
    extent of the impact of adverse economic conditions in markets
    outside the United States;
    tariffs or other trade barriers;
    fluctuations in currency exchange rates;
    potentially adverse tax consequences, including restrictions on
    repatriation of earnings; and
    difficulties in protecting intellectual property.    Risks
    Related to the Internet and Our Technological
    Infrastructure
  Any
    service interruption or failure in the systems that we use to
    provide online services could harm our business
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
    damage from fire, power loss and other natural disasters;
    communications failures;
    software and hardware errors, failures and crashes;
    security breaches, computer viruses and similar disruptive
    problems; and
    other potential service interruptions.      Implementation
    of additions to or changes in hardware and software platforms
    used to deliver our online services may result in performance
    problems and may not provide the additional functionality that
    was expected
    If the
    systems we use to provide online portals experience security
    breaches or are otherwise perceived to be insecure, our business
    could suffer
  denial-of-service
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Our
    online services are dependent on the development and maintenance
    of the Internet infrastructure
  denial-of-service
    Third
    parties may challenge the enforceability of our online
    agreements
    We could
    be subject to breach of warranty or other claims by clients of
    our online portals if the software and systems we use to provide
    them contain errors or experience failures
        Risks
    Related to the Healthcare Industry, Healthcare Regulation and
    Internet Regulation
  Developments
    in the healthcare industry could adversely affect our
    business
   48




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
    government regulation or private initiatives that affect the
    manner in which healthcare providers interact with patients,
    payers or other healthcare industry participants, including
    changes in pricing or means of delivery of healthcare products
    and services;
    consolidation of healthcare industry participants;
    reductions in governmental funding for healthcare; and
    adverse changes in business or economic conditions affecting
    healthcare payers or providers, pharmaceutical, biotechnology or
    medical device companies or other healthcare industry
    participants.      
    changes in the design of health insurance plans;
    a decrease in the number of new drugs or medical devices coming
    to market; and
    decreases in marketing expenditures by pharmaceutical or medical
    device companies, including as a result of governmental
    regulation or private initiatives that discourage or prohibit
    advertising or sponsorship activities by pharmaceutical or
    medical device companies.      Recently
    enacted federal health care reform legislation could adversely
    affect our healthcare industry customers and clients, causing
    them to reduce expenditures, including expenditures for our
    services
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Government
    regulation of healthcare creates risks and challenges with
    respect to our compliance efforts and our business
    strategies
    
    Regulation of Drug and Medical Device Advertising and
    Promotion.  The WebMD Health Networkprovides
    services involving advertising and promotion of prescription and
    over-the-counter
    drugs and medical devices. If the Food and Drug Administration
    (FDA) or the Federal Trade Commission (FTC) finds that any
    information on The WebMD Health Networkor in WebMD
    the Magazineviolates applicable regulations, they may take
    regulatory or judicial action against us
    and/or the
    advertiser or sponsor of that information. State attorneys
    general may also take similar action based on their states
    consumer protection statutes. Any increase or change in
    regulation of drug or medical device advertising and promotion
    could make it more difficult for us to contract for sponsorships
    and advertising. We cannot predict what actions the FDA or
    industry participants may take in the future, but the FDAs
    enforcement against pharmaceutical advertising increased in 2009
    from 2008 levels. It is also possible that new laws would be
    enacted that impose restrictions on such advertising. In
    addition, recent private industry initiatives have resulted in
    voluntary restrictions, which advertisers and sponsors have
    agreed to follow. Our advertising and sponsorship revenue could
    be materially reduced by additional restrictions on the
    advertising of prescription drugs and medical devices to
    consumers, whether imposed by law or regulation or required
    under policies adopted by industry members.
    Anti-kickback Laws.  There are federal and
    state laws that govern patient referrals, physician financial
    relationships and inducements to healthcare providers and
    patients. The federal healthcare programs anti-kickback
    law prohibits any person or entity from offering, paying,
    soliciting or receiving anything of value, directly or
    indirectly, for the referral of patients covered by Medicare,
    Medicaid and other federal healthcare programs or the leasing,
    purchasing, ordering or arranging for or recommending the lease,
    purchase or order of any item, good, facility or service covered
    by these programs. Many states also have similar anti-kickback
    laws that are not necessarily limited to items or services for
    which payment is made by a federal healthcare program. These
    laws are applicable to manufacturers and distributors and,
    therefore, may restrict how we and some of our customers market
    products to healthcare providers, including
    e-details.
    Any determination by a state or federal regulatory agency that
    any of our practices violate any of these laws could subject us
    to civil or criminal penalties and require us to change or
    terminate some portions of our business and could have an
    adverse effect on our 50




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business. Even an unsuccessful challenge by regulatory
    authorities of our practices could result in adverse publicity
    and be costly for us to respond to.  
    False Claims Laws.  The Federal False Claims
    Act imposes liability on any person or entity who, among other
    things knowingly presents, or causes to be presented, a false or
    fraudulent claim for payment by a Federal healthcare program. In
    addition, various states have enacted false claim laws analogous
    to the Federal False Claims Act, and many of these states laws
    apply where a claim is submitted to any third-party payor and
    not merely a federal healthcare program. When an entity is
    determined to have violated the Federal False Claims Act, it may
    be required to pay up to three times the actual damages
    sustained by the government plus civil penalties. In recent
    years an increasing number of Federal False Claims Act cases
    have been brought against drug manufacturers and resulted in
    significant monetary settlements and imposition of federally
    supervised corporate integrity agreements in circumstances that
    include allegations that company-sponsored CME was unlawful
    off-label promotion. Any action against us for violation of
    these laws could cause us to incur significant legal expenses
    and may adversely affect our ability to operate our business.
    Medical Professional Regulation.  The practice
    of most healthcare professions requires licensing under
    applicable state law. In addition, the laws in some states
    prohibit business entities from practicing medicine. If a state
    determines that some portion of our business violates these
    laws, it may seek to have us discontinue those portions or
    subject us to penalties or licensure requirements. Any
    determination that we are a healthcare provider and have acted
    improperly as a healthcare provider may result in liability to
    us.
    GINA.  The Genetic Information
    Nondiscrimination Act (GINA) prohibits discrimination based on
    genetic information in employment and in health insurance
    coverage. The law applies to our private portal customers
    including both employers and group health plans. WebMDs
    Health Risk Assessment (or HRA), HealthQuotient, is typically
    offered to employees as a voluntary component of their
    employer-sponsored wellness program. Title I of GINA can have
    significant implications for wellness programs offered by group
    health plans in that it prohibits the collection of genetic
    information, which includes an individuals family medical
    history, prior to or in connection with enrollment or for
    underwriting purposes. Underwriting purposes includes providing
    incentives or rewards for completion of an HRA that requests
    genetic information. Title II of GINA prohibits employment
    discrimination based on genetic information as well as the
    request or purchase of genetic information of employees or their
    family members with limited exceptions, including a limited
    exception for voluntary wellness programs. WebMD may face
    challenges as a result of varying interpretations of the law by
    the multiple enforcing agencies including the
    U.S. Departments of Health and Human Services
    (HHS), Labor and Treasury and the Equal Employment
    Opportunity Commission. It is possible that the final
    regulations may require modifications to our HealthQuotient
    product to either eliminate or revise the family history
    section. Interpretations of the law may increase operational
    costs or decrease demand for our product.  Government
    regulation of the Internet could adversely affect our
    business
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Failure
    to comply with laws relating to privacy and security of personal
    information, including personal health information, could result
    in liability to us and concerns about privacy-related issues
    could damage our reputation and our business
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Failure
    to maintain CME accreditation could adversely affect Medscape,
    LLCs ability to provide online CME offerings
        Government
    regulation and industry initiatives could adversely affect the
    volume of sponsored online CME programs implemented through our
    Web sites or require changes to how Medscape, LLC offers
    CME
  and/or
    
    may discourage pharmaceutical companies from providing grants
    for independent educational activities;
    may slow their internal approval for such grants;
    may reduce the volume of sponsored educational programs that
    Medscape, LLC produces to levels that are lower than in the
    past, thereby reducing revenue; and
    may require Medscape, LLC to make changes to how it offers or
    provides educational programs, including CME.     53




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Other
    Risks Applicable to Our Company and to Ownership of Our
    Securities
  Provisions
    in our organizational documents and Delaware law may inhibit a
    takeover, which could adversely affect the value of our Common
    Stock
    If
    certain transactions occur with respect to our capital stock,
    limitations may be imposed on our ability to utilize net
    operating loss carryforwards and tax credits to reduce our
    income taxes
        We may
    not be successful in protecting our intellectual property and
    proprietary rights
    Third
    parties may claim that we are infringing their intellectual
    property, and we could suffer significant litigation or
    licensing expenses or be prevented from providing certain
    services, which may harm our business
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Acquisitions,
    business combinations and other transactions may be difficult to
    complete and, if completed, may have negative consequences for
    our business and our security holders
    
    cash and cash equivalents on hand and marketable securities;
    proceeds from the incurrence of indebtedness; and
    proceeds from the issuance of common stock, preferred stock,
    convertible debt or of other securities.    
    cause substantial dilution of the percentage ownership of our
    stockholders at the time of the issuance;
    cause substantial dilution of our earnings per share;
    subject us to the risks associated with increased leverage,
    including a reduction in our ability to obtain financing or an
    increase in the cost of any financing we obtain;  
    subject us to restrictive covenants that could limit our
    flexibility in conducting future business activities; and  
    adversely affect the prevailing market price for our outstanding
    securities.    Our
    business will suffer if we fail to successfully integrate
    acquired businesses and technologies or to assess the risks in
    particular transactions
    
    our ability to maintain relationships with the customers of the
    acquired business;
    our ability to retain or replace key personnel;
    potential conflicts in sponsor or advertising relationships or
    in relationships with strategic partners;
    our ability to coordinate organizations that are geographically
    diverse and may have different business cultures; and
    compliance with regulatory requirements.   55




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We may
    not be able to raise additional funds when needed for our
    business or to exploit opportunities
     56




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ITEM 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate Sensitivity
      1 8
  ITEM 4.
    Controls
    and Procedures  Rule 13a-15(b), Rule 13a-15(e),
  Rule 13a-15(d),
 57




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PART II
    OTHER INFORMATION
  ITEM 1.
    Legal
    Proceedings    ITEM 1A.
    Risk
    Factors  Form 10-K
  Recently
    enacted federal health care reform legislation could adversely
    affect our healthcare industry customers and clients, causing
    them to reduce expenditures, including expenditures for our
    services
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ITEM 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Issuer
    Purchases of Equity Securities
  Total Number



Total Number of Shares

Approximate Dollar Value of Sharesof Shares

Average Price

Purchased as Part of Publicly

that May Yet Be Purchased UnderPeriod

Purchased(1)

Paid per Share

Announced Plans or Programs(2)

the Plans or Programs(2)1/01/10 - 1/31/10


95,688


$
38.82



93,070


$
26,388,7292/01/10 - 2/28/10


73,580


$
39.74



73,368


$
23,472,7803/01/10 - 3/31/10


46,867


$
46.36






$
23,472,780Total


216,135


$
40.77



166,438     (1)
    
    Includes the following number of
    shares withheld from WebMD restricted common stock that vested
    during the respective periods in order to satisfy withholding
    tax requirements related to the vesting of the awards: 2,618 in
    January, 212 in February and 46,867 in March. The value of these
    shares was determined based on the closing price of WebMD Common
    Stock on the date of vesting.(2)
    
    These repurchases were made
    pursuant to the repurchase program that WebMD announced in
    December 2008, at which time WebMD was authorized to use up to
    $30 million to purchase shares of its common stock from
    time to time. For additional information, see Note 8 to the
    Consolidated Financial Statements included in this Quarterly
    Report.  ITEM 6.
    Exhibits  page E-1
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SIGNATURES    WebMD
    Health Corp .
  By:
    /s/  Anthony
    Vuolo   Chief Operating Officer and
 Chief Financial Officer
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EXHIBIT INDEX  Exhibit No.

Description2
.1*

Purchase and Release Agreement, dated as of April 20, 2010,
    between WebMD Health Corp. and Citigroup Global Markets Inc.
    (incorporated by reference to Exhibit 2.1 to the
    Registrants Current Report on
    Form 8-K
    filed on April 26, 2010)3
.1

Restated Certificate of Incorporation of the Registrant
    (incorporated by reference to Exhibit 3.1 to the
    Registrants Registration Statement on
    Form S-8
    filed on October 23, 2009 (Reg.
    No. 333-162651))3
.2

Amended and Restated By-laws of the Registrant (incorporated by
    reference to Exhibit 3.2 to the Registrants
    Registration Statement on
    Form S-8
    filed on October 23, 2009 (Reg.
    No. 333-162651))10
.1

Letter Agreement, dated March 26, 2010, among SNTC Holding,
    Inc. and Porex Holding Corporation, Porex Corporation and Porex
    Surgical Inc.31
.1

Rule 13a-14(a)/15d-14(a)
    Certification of Chief Executive Officer of Registrant31
.2

Rule 13a-14(a)/15d-14(a)
    Certification of Chief Financial Officer of Registrant32
.1

Section 1350 Certification of Chief Executive Officer of
    Registrant32
.2

Section 1350 Certification of Chief Financial Officer of
    Registrant99
.1

Explanation of Non-GAAP Financial Measures     *
    
    With respect to the agreement filed as Exhibit 2.1, certain
    of the exhibits and the schedules to that agreement have been
    omitted pursuant to Item 601(b)(2) of
    Regulation S-K.
    The Registrant will furnish copies of any of the exhibits and
    schedules to the Securities and Exchange Commission upon request. E-1