EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

Not For Release

A.D.A.M., Inc. Announces Financial Results for Third Quarter 2007

Revenues increase 49%; Net Income increases 62%

ATLANTA, GA – November 6, 2007 – A.D.A.M., Inc. (NasdaqCM: ADAM) today announced financial results for its third quarter ended September 30, 2007.

Kevin Noland, President and Chief Executive Officer of A.D.A.M. commented, “The progress demonstrated in our third quarter results underscores the efforts we are making in aligning our business for future growth. The launch of Benergy 2G! during the quarter, which to date has been received with enthusiastic response, significantly enhances our ability to capitalize on marketplace needs for effective communication tools for employees regarding their health, wellness and benefit programs.”

Third Quarter Financial Highlights:

 

   

Revenues for the third quarter 2007 were $6,676,000 as compared to $4,473,000 in the same period last year, an increase of 49%. The increase is primarily attributable to A.D.A.M.’s acquisition of OnlineBenefits, Inc. in August, 2006 and additional sales of our health content licensing products.

 

   

Operating income for the third quarter 2007 was $1,345,000 as compared to $680,000 in the same period last year. Adjusted operating income for the third quarter, which excludes non-cash stock-based compensation and amortization expense from purchased intangibles associated with the acquisition of OnlineBenefits, was $1,788,000 as compared to $1,034,000 for the same period last year, an increase of 73%.

 

   

Adjusted EBITDA was $2,085,000 for the third quarter 2007 as compared to $1,247,000 in the same period last year, an increase of 67%. Adjusted EBITDA margins for the third quarter were 31% of revenues.

 

   

Net income for the third quarter 2007 was $788,000, or $0.07 per share, on a fully diluted basis as compared to $486,000 or $0.05 per share on a fully diluted basis for the year ago period.

September 2007 Year-to-Date Results

For the nine-month period ended September 30, 2007, revenues were $20,245,000, up 109% from $9,670,000 in the same period last year. Net income for the nine-month period ended September 30, 2007 was $2,115,000, or $0.20 per share on a fully diluted basis, as compared to $2,165,000, or $0.21 per share on a fully diluted basis for the same period last year. Increases in revenues and operating income are primarily attributable to the acquisition of OnlineBenefits. Net income for the first nine months of 2007 was impacted by the increased operating income, which was offset by interest charges of $1,938,000 associated with the debt used to acquire OnlineBenefits.


During the first nine months of 2007, A.D.A.M. generated $5,115,000 in cash flow from operations. As of September 30, 2007, A.D.A.M.’s cash and investments increased to $10,433,000 from $7,240,000 as of December 31, 2006 from the increased cash flow from operations, which was offset by principal payments on debt.

“We are also excited by a number of key additions we have made to the A.D.A.M. team during the quarter, including Dr. David Zieve. These additions allow us to build a strong product, support and sales foundation that drives future growth and competitive differentiation,” added Noland.

Non-GAAP Measures

Adjusted operating income represents operating income before non-cash stock-based compensation expense and amortization of purchased intangibles. Adjusted net income represents net income before non-cash stock-based compensation expense and amortization of purchased intangibles. Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and non-cash stock-based compensation expense. 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.

Forward-Looking Statements

The press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. The forward-looking statements are based on A.D.A.M.’s current intent, belief and expectations. These statements, especially revenue, net income, cash flow, 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

A.D.A.M. will be conducting a conference call to discuss its third quarter 2007 financial results on November 6, 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 21352692.

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

A.D.A.M. (NasdaqCM: ADAM) 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 HR 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.

###

Contact:

A.D.A.M., Inc.

Investor Relations

Victor Thompson

770-321-4326


A.D.A.M., Inc.

Condensed Consolidated Statements of Operations

Third Quarter, 2007 and 2006

(numbers in thousands, except per share data)

 

     Three Months Ended September 30,    

% Increase

(Decrease)

in US $

 
           % of           % of    
     2007     Revenues     2006     Revenues    

Revenues, net:

          

Licensing

   $ 5,822     87.2 %   $ 3,915     87.5 %   48.7 %

Product

     390     5.8 %     368     8.2 %   6.0 %

Professional services and other

     464     7.0 %     190     4.2 %   144.2 %
                              

Total revenues, net

     6,676     100.0 %     4,473     100.0 %   49.3 %
                              

Cost of Revenues:

          

Cost of revenues

     1,095     16.4 %     587     13.1 %   86.5 %

Cost of revenues—amortization

     371     5.6 %     257     5.7 %   44.4 %
                              

Total cost of revenues

     1,466     22.0 %     844     18.9 %   73.7 %
                              

Gross Profit

     5,210     78.0 %     3,629     81.1 %   43.6 %
                              

Operating expenses:

          

Product & content development

     1,107     16.6 %     874     19.5 %   26.7 %

Sales & marketing

     1,338     20.0 %     801     17.9 %   67.0 %

General & administrative

     1,420     21.3 %     1,274     28.5 %   11.5 %
                              

Total operating expenses

     3,865     57.9 %     2,949     65.9 %   31.1 %
                              

Operating income

     1,345     20.1 %     680     15.2 %   97.8 %
                              

Interest expense

     626     9.4 %     372     8.3 %   (a )

Interest income

     (69 )   -1.0 %     (178 )   -4.0 %   (a )
                              

Income before income taxes

     788     11.8 %     486     10.9 %   62.1 %
                              

Income tax expense (benefit)

     —       0.0 %     —       0.0 %   (a )

Net Income

   $ 788     11.8 %   $ 486     10.9 %   62.1 %
                              

Earnings Per Share

          

Basic

   $ 0.08       $ 0.06      

Diluted

   $ 0.07       $ 0.05      

Weighted Average Common Shares Outstanding

          

Basic

     9,575         8,711      

Diluted

     10,587         10,096      

(a) not meaningful


A.D.A.M., Inc.

Condensed Consolidated Statement of Operations

Third Quarter, 2007 and 2006

(numbers in thousands, except per share data)

 

     Nine Months Ended September 30,    

% Increase

(Decrease)

in US $

 
           % of           % of    
     2007     Revenues     2006     Revenues    

Revenues, net:

          

Licensing

   $ 17,380     85.8 %   $ 8,152     84.3 %   113.2 %

Product

     1,312     6.5 %     1,110     11.5 %   18.2 %

Professional services and other

     1,553     7.7 %     408     4.2 %   280.6 %
                              

Total revenues, net

     20,245     100.0 %     9,670     100.0 %   109.4 %
                              

Cost of Revenues:

          

Cost of revenues

     4,143     20.5 %     1,208     12.5 %   243.0 %

Cost of revenues—amortization

     1,006     5.0 %     634     6.6 %   58.7 %
                              

Total cost of revenues

     5,149     25.4 %     1,842     19.0 %   179.5 %
                              

Gross Profit

     15,096     74.6 %     7,828     81.0 %   92.8 %
                              

Operating expenses:

          

Product & content development

     3,427     16.9 %     1,584     16.4 %   116.4 %

Sales & marketing

     3,816     18.8 %     1,690     17.5 %   125.8 %

General & administrative

     3,921     19.4 %     2,472     25.6 %   58.6 %
                              

Total operating expenses

     11,164     55.1 %     5,746     59.4 %   94.3 %
                              

Operating income

     3,932     19.4 %     2,082     21.5 %   88.9 %
                              

Interest expense

     1,938     9.6 %     376     3.9 %   (a )

Interest income

     (125 )   -0.6 %     (459 )   -4.7 %   (a )

Realized (gain) loss on investments

     —       0.0 %     —       0.0 %   (a )

Loss on sale of assets

     4     0.0 %     —       0.0 %   (a )
                              

Income before income taxes

     2,115     10.4 %     2,165     22.4 %   -2.3 %
                              

Income tax expense (benefit)

     —       0.0 %     —       0.0 %   (a )

Net Income

   $ 2,115     10.4 %   $ 2,165     22.4 %   -2.3 %
                              

Earnings Per Share

          

Basic

   $ 0.22       $ 0.26      

Diluted

   $ 0.20       $ 0.21      

Weighted Average Common Shares Outstanding

          

Basic

     9,404         8,487      

Diluted

     10,326         10,079      

(a) not meaningful


A.D.A.M., Inc.

Non-GAAP Condensed Financial Results

Third Quarter, 2007 and 2006

(numbers in thousands)

 

     Three Months Ended September 30,     % Increase (Decrease)  
    

2007

GAAP

         

2007

Non-GAAP

   

2006

GAAP

         

2006

Non-GAAP

             
       Adj.         Adj.       GAAP     Non-GAAP  

Total revenues

   $ 6,676     $ —       $ 6,676     $ 4,473     $ —       $ 4,473     49.3 %   49.3 %

Total operating expenses

     5,331       (443 )     4,888       3,793       (354 )     3,439     40.5 %   42.1 %

Stock-based compensation (1)

     255       (255 )     —         255       (255 )     —       0.0 %   (a )

Amortization of purchased intangibles (2)

     188       (188 )     —         99       (99 )     —       (a )   (a )

Operating income

     1,345       443       1,788       680       354       1,034     97.8 %   72.9 %

Operating margin %

     20.1 %       26.8 %     15.2 %       23.1 %    

Income before income taxes

     788       443       1,231       486       354       840     62.1 %   46.5 %

Income tax expense (benefit)

     —         —         —         —         —         —       (a )   (a )

Net Income

     788       443       1,231       486       354       840     62.1 %   46.5 %

Diluted earnings per share

   $ 0.07       $ 0.12     $ 0.05       $ 0.08     54.6 %   39.8 %

Diluted shares outstanding

     10,587         10,587       10,096         10,096      

Income before income taxes

     788       443       1,231       486       354       840      

Depreciation

     114       —         114       55       —         55      

Amortization of software development

     183       —         183       158       —         158      

Amortization of purchase intangibles (2)

     188       (188 )     —         99       (99 )     —        

Interest expense (income)

     557       —         557       194       —         194      
                                                    

EBITDA

   $ 1,830     $ 255     $ 2,085     $ 992     $ 255     $ 1,247     84.5 %   67.2 %
                                                    

(a) not meaningful
(1) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.
(2) Amortization of customer list and purchased software acquired with Online Benefits.


A.D.A.M., Inc.

Non-GAAP Condensed Financial Results

Third Quarter, 2007 and 2006

(numbers in thousands)

 

     Nine Months Ended September 30,     % Increase (Decrease)  
     2007
GAAP
    Adj.     2007
Non-GAAP
    2006
GAAP
    Adj.     2006
Non-GAAP
    GAAP     Non-GAAP  

Total revenues

   $ 20,245     $     $ 20,245     $ 9,670     $     $ 9,670     109.4 %   109.4 %

Total operating expenses

     16,313       (1,060 )     15,253       7,588       (219 )     7,369     115.0 %   107.0 %

Stock-based compensation (1)

     495       (495 )     —         120       (120 )     —       312.5 %   (a )

Amortization of purchase intangibles (2)

     565       (565 )     —         99       (99 )     —       (a )   (a )

Operating income

     3,932       1,060       4,992       2,082       219       2,301     88.9 %   116.9 %

Operating margin %

     19.4 %       24.7 %     21.5 %       23.8 %    

Income before income taxes

     2,115       1,060       3,175       2,165       219       2,384     -2.3 %   33.2 %

Income tax expense (benefit)

     —         —         —         —         —         —       (a )   (a )

Net Income

     2,115       1,060       3,175       2,165       219       2,384     -2.3 %   33.2 %

Diluted net income (loss) per share

   $ 0.20       $ 0.31     $ 0.21       $ 0.24     -4.6 %   30.0 %

Diluted shares outstanding

     10,326         10,326       10,079         10,079      

Income before income taxes

     2,115       1,060       3,175       2,165       219       2,384      

Depreciation

     330       —         330       131       —         131      

Amortization of software development

     441       —         441       535       —         535      

Amortization of purchase intangibles (2)

     565       (565 )     —         99       (99 )     —        

Interest expense (income)

     1,813       —         1,813       (83 )     —         (83 )    
                                                    

EBITDA

   $ 5,264     $ 495     $ 5,759     $ 2,847     $ 120     $ 2,967     84.9 %   94.1 %
                                                    

(a) not meaningful
(1) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.
(2) Amortization of customer list and purchased software acquired with Online Benefits.


A.D.A.M., Inc.

Consolidated Balance Sheets

September 30, 2007 and December 31, 2006

(numbers in thousands)

 

     September
30, 2007
    December
31, 2006
 

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 10,433     $ 6,382  

Short term investments

     —         858  

Accounts receivable, net

     2,574       3,082  

Restricted cash

     45       2,192  

Inventories

     93       74  

Prepaids and other current assets

     1,004       1,673  
                

Total current assets

     14,149       14,261  
                

Non-current assets

    

Property and equipment, net

     889       876  

Intangible assets, net

     10,241       10,276  

Goodwill

     28,022       27,883  

Other assets

     152       158  

Deferred financing costs, net

     933       1,184  

Deferred tax asset, net of current portion

     5,500       5,500  
                

Total non-current assets

     45,737       45,877  
                

TOTAL ASSETS

   $ 59,886     $ 60,138  
                

Liabilities and Shareholders' Equity

    

Current liabilities

    

Accounts payables and accrued expenses

   $ 3,125     $ 4,075  

Deferred revenue

     5,475       4,447  

Note payable

     —         1,500  

Current portion of long term debt

     2,000       1,000  

Current portion of capital lease obligations

     120       155  
                

Total current liabilities

     10,720       11,177  
                

Non-current liabilities

    

Capital lease obligations, net of current portion

     113       178  

Other liabilities

     987       1,314  

Long term debt, net of current portion

     21,000       24,000  
                

Total non-current liabilities

     22,100       25,492  
                

Stockholders' equity

    

Common stock

     99       94  

Treasury stock

     (1,088 )     (1,088 )

Additional paid-in capital

     55,688       54,109  

Unrealized gain (loss) on investments

     (104 )     (2 )

Accumulated deficit

     (27,529 )     (29,644 )
                

Total stockholders' equity

     27,066       23,469  
                

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

   $ 59,886     $ 60,138  
                


A.D.A.M., Inc.

Condensed Consolidated Statements of Cash Flows

Third Quarter, 2007 and 2006

(numbers in thousands)

 

     Nine Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2007     2006  

Cash flows from operating activities

    

Net income

   $ 2,115     $ 2,165  

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

    

Depreciation and amortization

     1,336       765  

Deferred financing cost amortization

     258       —    

Gain on sale of assets

     4       —    

Stock-based compensation expense

     495       120  

Other, net

     —         (19 )

Changes in assets and liabilities:

    

Accounts receivable

     507       (110 )

Inventories

     (18 )     (8 )

Prepaids and other assets

     667       (61 )

Accounts payable and accrued liabilities

     (950 )     (223 )

Deferred revenue

     1,028       (327 )

Other liabilities

     (327 )     153  
                

Net cash provided by operating activities

     5,115       2,455  
                

Cash flows from investing activities

    

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

     —         (29,353 )

Purchases of property and equipment

     (354 )     (113 )

Proceeds from sale of property and equipment

     7       —    

Additional costs of previous acquisition

     (139 )     —    

Net change in restricted cash

     2,148       24  

Software product and content development costs

     (971 )     (589 )

Maturities and reclassifications of investments

     747       2,055  

Proceeds of investments

     179       3,063  

Purchase of investments

     (170 )     —    
                

Net cash provided by investing activities

     1,447       (24,913 )
                

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 )

Payment on note payable

     (1,500 )     —    

Payment on long term debt

     (2,000 )     —    

Proceeds from exercise of common stock options

     1,089       502  

Repayments on capital leases

     (100 )     (236 )
                

Net cash (used in) provided by financing activities

     (2,511 )     23,927  
                

Increase (decrease) in cash and cash equivalents

     4,051       1,469  
                

Cash and cash equivalents, beginning of the period

     6,382       2,816  
                

Cash and cash equivalents, end of the period

   $ 10,433     $ 4,285