EX-99.1 3 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

A.D.A.M., Inc. Reports Fourth Quarter and Full Year 2006 Results

A.D.A.M. Completes Acquisition of Online Benefits, Inc.,

Reports Yearly Revenue Increase of 64%

ATLANTA – A.D.A.M., Inc. (Nasdaq: ADAM), a leading provider of health information services and benefits management solutions, today reported financial results for the fourth quarter and year ended December 31, 2006.

Financial highlights for the fourth quarter and year include:

 

   

Revenues for the fourth quarter ended December 31, 2006 were $6,835,000 as compared to $2,507,000 in the year-ago period, an increase of 173%. The increase in revenue is attributable to the acquisition of Online Benefits, which was completed in August 2006, growth in A.D.A.M.’s content licensing revenues and growth in sales of A.D.A.M.’s educational and print products.

 

   

Revenues for the year ended December 31, 2006 were $16,505,000 as compared to $10,054,000 in the year-ago period, an increase of 64%. Recurring license revenues accounted for 84% of 2006 total revenues.

 

   

Operating income for the fourth quarter ended December 31, 2006, which included severance costs of $485,000, increased to $1,051,000 or 15.4% of revenues. Adjusted operating income for the quarter was $1,740,000, or 25.5% of revenues.

 

   

Operating income for the year ended December 31, 2006 was $3,132,000 or 19% of revenues. Adjusted operating income for the year was $4,041,000, or 24.5% of revenues.

 

   

Net income for the year ended December 31, 2006 was $2,548,000 or $0.25 per share on a fully diluted basis, compared to net income of $7,062,000, or $0.75 per share on a fully diluted basis, for the year ended December 31, 2005. Net income for the year ended December 31, 2005 included a $5,500,000 tax benefit. Adjusted net income for the year ended December 31, 2006 was $3,457,000 or $0.34 per share on a fully diluted basis, compared to $2,106,000 or $0.22 per share on a fully diluted basis, for the year ended December 31, 2005.

 

   

As of December 31, 2006, cash and investments were approximately $7,240,000. For the year ended December 31, 2006, adjusted EBITDA was $4,913,000, an increase from $2,786,000 for the year ended December 31, 2005.

“Last year was a transformational year for our company. We believe the acquisition of Online Benefits positions us favorably to provide the solutions small and mid-size employers need to deal with rising benefit and healthcare costs,” commented Kevin S.


Noland, A.D.A.M.’s president and chief executive officer. “The need for information and decision-support tools to enable consumers to become more effective participants in their benefit plan and health and wellness has never been greater, and we see continued demand for these types of services as more employers look for ways to manage costs and improve the productivity of their employees.

Additionally, we see continued demand in our healthcare markets for content and applications that speak to our client’s needs for engaging their members, patients and consumer audiences in their health and wellness. We have a strong pipeline of new products that will drive our long term growth and expand our operating margins, including Benergy 2G!, our next generation consumer benefits and health management portal that we are expecting to release in phases during 2007, with the initial release in the second quarter.”

2006 Highlights

 

   

Completed the acquisition and integration of Online Benefits, Inc. in August 2006. Benergy™, Online Benefits’ principal product, is a scalable benefits management solution for the small to mid-sized employer market. Benergy is distributed by more than 500 benefits brokers throughout the U.S. and is in use by more than 5,000 employers.

 

   

Signed a multi-year distribution agreement with Thomson Micromedex, a Thomson healthcare business. Thomson Micromedex will distribute our health content products to their provider, payer and healthcare IT customers.

 

   

Selected by Walgreen Co. to provide consumer health information on Walgreens.com.

 

   

Launched several new products, including the A.D.A.M. DecisionAssist suite and Health Risk Assessment Reporting Tools to address the needs of the accelerating consumer driven health marketplace. Our DecisionAssist tools help consumers make important decisions about their healthcare options, such as whether to have a particular surgery, proceed with a test, take certain medications or use other healthcare services. Our reporting tools provide vital information about the health of employees, members, or other end users that facilitates healthy employee habits, improvements to workplace productivity, and appropriate utilization of health services.

Non-GAAP Measures

Adjusted Operating Income represents operating income before severance costs, non-cash stock-based compensation expense and amortization of purchased intangibles. Adjusted Net Income represents net income before severance costs, non-cash stock-based compensation expense, amortization of purchased intangibles and the recognition of deferred income tax benefit from the re-evaluation of our income tax reserves. Adjusted


EPS is computed using Adjusted Net Income. Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and non-cash stock-based compensation expense and the recognition of deferred income tax benefit from the re-evaluation of our income tax reserves. These financial measures are not measures of financial performance in accordance with generally accepted accounting principles. We believe these non-GAAP financial measures are useful because they are appropriate measures for evaluating our operating performance. We present these non-GAAP financial measures to provide additional information regarding our performance and because they are measures by which we gauge our profitability. You should not consider these non-GAAP financial measures as an alternative to net income. Our calculation of these financial measures may be different from the calculations used by other companies and, as a result, comparability may be limited. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measure as provided with the financial results attached to this press release.

Forward-Looking Statements

Except for historical information, all of the statements, expectations and assumptions contained in this press release are forward-looking statements. These statements, especially revenue, net income and cash flow forecasts, involve a number of risks and uncertainties that could cause actual results, performance or developments to differ materially. Factors that could affect the company’s actual results, performance or developments include general economic conditions, development of the Internet as a source of health information, pricing actions taken by competitors, demand for the company’s health information, the ability to realize the anticipated benefits of the acquisition, regulatory changes in laws and regulations that impact how the company conducts its business and the other factors described in A.D.A.M.’s filings with the SEC. A.D.A.M. disclaims any obligation or duty to update any of its forward-looking statements.

Conference Call and Earnings Release Information

The Company will be conducting a conference call to discuss final earnings results for the fourth quarter and year-end on March 20, 2007, at 10:00 A.M. ET. To participate in the call, please dial (866) 624-3372 approximately five minutes prior to the start time. International callers may dial (706) 758-3874. A digital replay will be available the following day by dialing (800) 633-8284 or (402) 977-9140 with reservation number 21328889. The Company will issue its final results prior to the conference call.

About A.D.A.M., Inc.

A.D.A.M. (Nasdaq: ADAM—News) is a leading provider of health information services and benefits management solutions serving healthcare organizations, employers, insurance brokers, consumers, and educational institutions. With an industry-leading employee and human resources benefits management platform and one of the largest


consumer health information libraries in the world, A.D.A.M. engages consumers to learn about their health and manage their benefit choices while reducing the costs of healthcare and benefits administration. For more information, visit www.adam.com or call 1-800-408-ADAM.

For further information contact:

Victor Thompson, Investor Relations

A.D.A.M., Inc.

(770) 425-7877

A.D.A.M., Inc.

Consolidated Statement of Operations

Fourth Quarter, 2006 and 2005

(In thousands, except per share data)

 

     Three Months Ended December 31,    

% Increase

(Decrease)

 
    

2006

   

% of

Revenues

   

2005

   

% of

Revenues

   

Revenues, net:

          

Licensing

   $ 5,667     82.9 %   $ 2,001     79.8 %   183.2 %

Product

     484     7.1 %     277     11.0 %   74.7 %

Professional services and other

     684     10.0 %     229     9.1 %   198.7 %
                              

Total revenues, net

     6,835     100.0 %     2,507     100.0 %   172.6 %
                              

Cost of Revenues:

          

Cost of revenues

     1,283     18.8 %     462     18.4 %   177.7 %

Cost of revenues-amortization

     316     4.6 %     177     7.1 %   78.5 %
                              

Total cost of revenues

     1,599     23.4 %     639     25.5 %   150.2 %
                              

Gross Profit

     5,236     76.6 %     1,868     74.5 %   180.3 %
                              

Operating expenses:

          

Product & content development

     1,120     16.4 %     353     14.1 %   217.3 %

Sales & marketing

     1,214     17.8 %     602     24.0 %   101.7 %

General & administrative

     1,851     27.1 %     1,388     55.4 %   33.4 %
                              

Total operating expenses

     4,185     61.2 %     2,343     93.5 %   78.6 %
                              

Operating income (loss)

     1,051     15.4 %     (475 )   -18.9 %   *  
                              

Interest expense

     726     10.6 %     9     0.4 %   *  

Interest income

     (58 )   -0.8 %     (119 )   -4.7 %   *  

Realized (gain) loss on investments

     —       —         40     1.6 %   *  
                              

Income (loss) before income taxes

     383     5.6 %     (405 )   -16.2 %   *  
                              

Income tax expense (benefit)

     —       —         100     4.0 %   *  

Net Income (Loss)

   $ 383     5.6 %   $ (505 )   -20.1 %   *  
                              

Earnings (Loss) Per Share

          

Basic

   $ 0.04       $ (0.06 )    

Diluted

   $ 0.04       $ (0.06 )    

Weighted Average Common Shares Outstanding

          

Basic

     9,023         8,483      

Diluted

     10,354         8,483      

 

* not meaningful


A.D.A.M., Inc.

Consolidated Statement of Operations

Calendar Year 2006 and 2005

(In thousands, except per share data)

 

     Year Ended December 31,     % Increase
(Decrease)
 
     2006     % of
Revenues
    2005     % of
Revenues
   

Revenues, net:

          

Licensing

   $ 13,818     83.7 %   $ 7,598     75.6 %   81.9 %

Product

     1,594     9.7 %     1,737     17.3 %   -8.2 %

Professional services and other

     1,093     6.6 %     719     7.2 %   52.0 %
                              

Total revenues, net

     16,505     100.0 %     10,054     100.0 %   64.2 %
                              

Cost of Revenues:

          

Cost of revenues

     2,490     15.1 %     1,354     13.5 %   83.9 %

Cost of revenues-amortization

     951     5.8 %     709     7.1 %   34.1 %
                              

Total cost of revenues

     3,441     20.8 %     2,063     20.5 %   66.8 %
                              

Gross Profit

     13,064     79.2 %     7,991     79.5 %   63.5 %
                              

Operating expenses:

          

Product & content development

     2,704     16.4 %     1,456     14.5 %   85.7 %

Sales & marketing

     2,903     17.6 %     1,965     19.5 %   47.7 %

General & administrative

     4,325     26.2 %     3,281     32.6 %   31.8 %
                              

Total operating expenses

     9,932     60.2 %     6,702     66.7 %   48.2 %
                              

Operating income

     3,132     19.0 %     1,289     12.8 %   143.0 %
                              

Interest expense

     1,102     6.7 %     36     0.4 %   *  

Interest income

     (518 )   -3.1 %     (349 )   -3.5 %   48.4 %

Realized (gain) loss on investments

     —       —         40     0.4 %   *  
                              

Income before income taxes

     2,548     15.4 %     1,562     15.5 %   63.1 %
                              

Income tax expense (benefit)

     —       —         (5,500 )   -54.7 %   *  

Net Income

   $ 2,548     15.4 %   $ 7,062     70.2 %   -63.9 %
                              

Earnings Per Share

          

Basic

   $ 0.30       $ 0.87      

Diluted

   $ 0.25       $ 0.75      

Weighted Average Common Shares Outstanding

          

Basic

     8,630         8,108      

Diluted

     10,074         9,468      

 

* not meaningful


A.D.A.M., Inc.

Non-GAAP Condensed Financial Results

Fourth Quarter, 2006 and 2005

(In thousands, except per share data)

 

     Three Months Ended December 31,     % Increase (Decrease)  
     2006
GAAP
    Adj.     2006
Non-GAAP
    2005
GAAP
    Adj.     2005
Non-GAAP
    GAAP     Non-GAAP  

Total revenues, net

   $ 6,835     $ —       $ 6,835     $ 2,507     $ —       $ 2,507     172.6 %   172.6 %

Total operating costs and expenses

     5,784       (689 )     5,095       2,982       (485 )     2,497     94.0 %   104.0 %

Stock-based compensation (1)

     16       (16 )     —         485       (485 )     —       -96.7 %   —    

Amortization of purchased intangibles (2)

     188       (188 )     —         —         —         —       —       —    

Severance (3)

     485       (485 )     —         —         —         —       —       —    

Operating income (loss)

     1,051       689       1,740       (475 )     485       10     *     *  

Operating margin %

     15.4 %       25.5 %     -18.9 %       0.4 %   *     *  

Income (loss) before income taxes

     383       689       1,072       (405 )     485       80     *     *  

Income tax expense (benefit)

     —         —         —         100       —         100     *     *  

Net Income (Loss)

     383       689       1,072       (505 )     485       (20 )   *     *  

Diluted earnings (loss) per share

   $ 0.04       $ 0.10     $ (0.06 )     $ (0.00 )    

Diluted shares outstanding

     10,354         10,354       8,483         8,483      

Income (loss) before income taxes

     383       689       1,072       (405 )     485       80      

Depreciation

     80       —         80       47       —         47      

Amortization of software development

     128       —         128       176       —         176      

Amortization of purchase intangibles (2)

     188       (188 )     —         —         —         —        

Interest expense (income)

     667       —         667       (110 )     —         (110 )    
                                                    

EBITDA

   $ 1,446     $ 501     $ 1,947     $ (292 )   $ 485     $ 193      
                                                    

EBITDA margin %

     21.2 %       28.5 %     -11.6 %       7.7 %    

 

* not meaningful

Adjustment Explanations:

 

(1) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.

 

(2) Amortization of customer relationships and purchased software acquired with Online Benefits.

 

(3) Severance costs related to reduction in force during the period.


A.D.A.M., Inc.

Non-GAAP Condensed Financial Results

Calendar Year 2006 and 2005

(In thousands, except per share data)

 

     Year Ended December 31,     % Increase (Decrease)  
     2006
GAAP
    Adj.     2006
Non-GAAP
    2005
GAAP
    Adj.     2005
Non-GAAP
    GAAP     Non-GAAP  

Total revenues

   $ 16,505     $ —       $ 16,505     $ 10,054     $ —       $ 10,054     64.2 %   64.2 %

Total operating cost and expenses

     13,373       (909 )     12,464       8,765       (644 )     8,121     52.6 %   53.5 %

Stock-based compensation (1)

     136       (136 )     —         644       (644 )     —       -78.9 %   —    

Amortization of purchase intangibles (2)

     288       (288 )     —         —         —         —       —       —    

Severance (3)

     485       (485 )     —         —         —         —       —       —    

Operating income

     3,132       909       4,041       1,289       644       1,933     143.0 %   109.1 %

Operating margin %

     19.0 %       24.5 %     12.8 %       19.2 %   48.0 %   27.3 %

Income before income taxes

     2,548       909       3,457       1,562       644       2,206      

Income tax expense (benefit) (4)

     —         —         —         (5,500 )     5,600       100      

Net Income

     2,548       909       3,457       7,062       (4,956 )     2,106     -63.9 %   64.2 %

Diluted net income (loss) per share

   $ 0.25       $ 0.34     $ 0.75       $ 0.22      

Diluted shares outstanding

     10,074         10,074       9,468         9,468      

Income before income taxes

     2,548       909       3,457       1,562       644       2,206      

Depreciation

     209       —         209       184       —         184      

Amortization of software development

     663       —         663       709       —         709      

Amortization of purchase intangibles (2)

     288       (288 )     —         —         —         —        

Interest expense (income)

     584       —         584       (313 )     —         (313 )    
                                                    

EBITDA

   $ 4,292     $ 621     $ 4,913     $ 2,142     $ 644     $ 2,786      
                                                    

EBITDA margin %

     26.0 %       29.8 %     21.3 %       27.7 %    

 

* not meaningful

Adjustment Explanations:

 

(1) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.

 

(2) Amortization of customer relationships and purchased software acquired with Online Benefits.

 

(3) Severance costs related to reduction in force during the period.

 

(4) Income tax benefit recorded, related to the re-evaluation of our deferred tax valuation allowance.


A.D.A.M., Inc.

Consolidated Balance Sheet

Fourth Quarter, 2006 and 2005

(In thousands)

 

     Year Ended December 31,  
     2006     2005  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 6,382     $ 2,816  

Short term investments

     858       7,861  

Accounts receivable, net

     3,082       1,840  

Restricted cash

     2,192       25  

Inventories

     74       68  

Prepaids and other current assets

     1,673       463  

Deferred tax asset

     —         221  
                

Total current assets

     14,261       13,294  

Non-current assets

    

Property and equipment, net

     876       268  

Intangible assets, net

     10,276       953  

Goodwill

     27,883       2,043  

Other assets

     158       43  

Deferred financing costs, net

     1,184       —    

Deferred tax asset, net of current portion

     5,500       5,279  
                

Total non-current assets

     45,877       8,586  
                

TOTAL ASSETS

   $ 60,138     $ 21,880  
                

Liabilities and Shareholders’ Equity

    

Current liabilities

    

Accounts payable and accrued expenses

   $ 4,075     $ 1,055  

Deferred revenue

     4,447       3,643  

Note payable

     1,500       —    

Current portion of long-term debt

     1,000       —    

Capital lease obligations, current portion

     155       20  
                

Total current liabilities

     11,177       4,718  

Non-current liabilities

    

Capital lease obligations, net of current portion

     178       18  

Other liabilities

     1,314       —    

Long term debt long-term

     24,000       —    
                

Total non-current liabilities

     25,492       18  

Stockholders’ equity

    

Common stock

     94       85  

Treasury stock

     (1,088 )     (1,088 )

Additional paid-in capital

     54,109       50,350  

Unrealized gains (loss)

     (2 )     (11 )

Accumulated deficit

     (29,644 )     (32,192 )
                

Total stockholders’ equity

     23,469       17,144  
                

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 60,138     $ 21,880  
                


A.D.A.M., Inc.

Consolidated Statement of Cash Flows

Fourth Quarter 2006 and Year-to-Date, 2006 and 2005

(In thousands)

 

     Three Months Ended
December 31,
2006
    Year Ended December 31,  
       2006     2005  

Cash flows from operating activities

      

Net income

   $ 383     $ 2,548     $ 7,062  

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation and amortization

     396       1,161       894  

Deferred financing cost amortization

     140       140       —    

Stock compensation for services

     —         —         23  

Stock-based compensation expense

     16       136       643  

Deferred income taxes

     —         —         (5,500 )

Gain on sale of assets

     2       2    

Loss on sale of investments

     29       29       40  

Other, net

     19       —         —    

Changes in assets and liabilities, net of effects from acquisition:

      

Accounts receivable

     93       (17 )     272  

Inventories

     2       (6 )     39  

Prepaids and other assets

     (76 )     (137 )     (94 )

Accounts payable and accrued liabilities

     468       245       569  

Deferred revenue

     (453 )     (780 )     28  

Other liabilities

     (150 )     4       —    
                        

Net cash provided by operating activities

     869       3,325       3,976  
                        

Cash flows from investing activities

      

Acquisition of subsidiary, net of cash acquired of $1,548

     225       (29,128 )     —    

Purchases of property and equipment

     (74 )     (187 )     (204 )

Net change in restricted cash

     (690 )     (666 )     47  

Software product and content development costs

     (385 )     (974 )     (455 )

Maturities and reclassifications of investments

     1,936       3,990       5,232  

Proceeds from sale of investments

     1,028       4,091       (9,418 )

Purchase of investments

     (1,098 )     (1,098 )     —    
                        

Net cash provided by (used in) investing activities

     942       (23,972 )     (4,798 )
                        

Cash flows from financing activities

      

Proceeds from issuance of term note

     —         20,000       —    

Proceeds from issuance of convertible notes

     —         5,000       —    

Payment of financing costs

     —         (1,339 )     —    

Proceeds from exercise of common stock options and warrants

     129       631       783  

Repayments on notes receivable

     —         —         125  

Repurchase of common stock to be held as treasury stock

     —         —         (496 )

Repayments on capital leases

     157       (79 )     (16 )
                        

Net cash provided by financing activities

     286       24,213       396  
                        

Increase (decrease) in cash and cash equivalents

     2,097       3,566       (426 )
                        

Cash and cash equivalents, beginning of the period

     4,285       2,816       3,242  
                        

Cash and cash equivalents, end of the period

   $ 6,382     $ 6,382     $ 2,816