EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

A.D.A.M., Inc. Announces Financial Results for Second Quarter 2008

License revenues increase 8%; Adjusted net income increases 17%

ATLANTA, GA – August 14, 2008 – A.D.A.M., Inc. (NASDAQ: ADAM), a leading provider of health information and benefit technology solutions, today announced financial results for its second quarter ended June 30, 2008.

“We believe strongly that the long-term market opportunity for our health and benefits management solutions is significant,” said Kevin Noland, A.D.A.M.’s president and chief executive officer. “We are pleased that the investments we made to strengthen our content sales and support functions during 2007 have resulted in strong year-over-year growth in health content licensing revenues. We have made similar investments through the first half of 2008 to drive growth for our Benergy system. With these investments and fresh initiatives into the employer market, we are confident in our abilities to capitalize on the need of employers across the country to provide health and benefits management solutions to their organizations.”

Second Quarter Financial Highlights

Licensing revenues for the second quarter ended June 30, 2008 were $6,330,000 as compared to $5,860,000 for the same period of 2007, an increase of 8%. The increase in revenues is primarily attributable to additional license sales of A.D.A.M.’s health content products.

Total revenues for the second quarter ended June 30, 2008 were $7,189,000 as compared to $7,024,000 for the same period of 2007, an increase of 2%. The increase in revenues is primarily attributable to increased license sales tempered by a decline in product sales to the education market and a reduced number of new benefit brokers added during the period as the Company adjusts its business model to include direct sales to larger employers.

Net income for the second quarter ended June 30, 2008 was $810,000 or $0.08 per share on a fully diluted basis as compared to $861,000 or $0.08 per share on a fully diluted basis for the same period of 2007.

Adjusted non-GAAP net income for the second quarter ended June 30, 2008 was $1,176,000 compared to $1,007,000 for the same period in 2007, an increase of 17%.

Adjusted EBITDA was $1,900,000 for the second quarter ended June 30, 2008 as compared to $1,823,000 for the same period of 2007, an increase of 4%. Adjusted EBITDA margins for the second quarters of 2008 and 2007 were 26% of revenues.

First-Half 2008 Results

For the six-month period ended June 30, 2008, revenues were $14,312,000, up 5% from $13,570,000 in the same period last year. Net income for the six-month period ended June 30, 2008 was $1,358,000, as compared to $1,327,000, for the same period last year. Increases in revenues are primarily attributable to increased sales of the Company’s health content products. Net income for the first-half of 2008 was impacted by the increased investments in sales, marketing and customer support to drive long-term growth and support the current customer base, as compared to the same period in 2007 that included a benefit or reduction in costs associated with stock compensation expenses.

During the first six months of 2008, A.D.A.M. generated $2,764,000 in cash flow from operations and the Company’s cash on hand was $3,882,000 at June 30, 2008.

Use of Non-GAAP Measures

To supplement our consolidated financial statements presented in accordance with GAAP, we present investors with certain non-GAAP operational measures, including adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA, all of which primarily exclude the effects of amortization of intangible assets, stock-based compensation, acquisition related expenses, restructuring charges and the income tax benefits from valuation of future tax loss carryforwards.


Our management considers the total return of an investment we have made in an acquisition (i.e., operating profit generated as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Thus, because the purchase price for an acquisition, does not necessarily reflect the accounting value assigned to intangible assets, including customer lists and goodwill, when analyzing the return provided by the acquisition in subsequent periods, our management for planning and evaluation purposes excludes the GAAP impact of acquired intangible assets and other acquisition related expenses to our financial results. We believe that such an approach is useful in understanding the long-term return provided by an acquisition and that our investors benefit from a supplemental non-GAAP financial measure that adjusts for the accounting expense associated with acquired intangible assets.

Similarly, we believe that excluding stock-based compensation expense provides supplemental information and an alternative presentation useful to investors’ understanding of our operating results and trends, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods.

We also believe that, in excluding stock-based compensation expense and amortization of intangible assets, our non-GAAP financial measures provide investors with transparency into the information and basis used by management and our board of directors to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods, to compare our results of operations on a more consistent basis against that of other companies in making financial and operating decisions, and to establish targets for management incentive compensation.

We believe that the presentation of non-GAAP operational measures of adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA provide important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. These non-GAAP operational measures have historically been used as key performance metrics by our senior management as they evaluate the performance of the consolidated financial results. These non-GAAP operational measures are reviewed individually as well as in total in measuring our performance against internal and external expectations for the period. The expectations for such key non-GAAP operational measures are the basis for any financial guidance provided by management for future periods. Management believes that the use of each of these non-GAAP financial measures provides enhanced consistency and comparability with our past financial reports. We provide this information to investors to enable them to perform additional analyses of past, present and future operating performance.

We believe that each of these operational measures is useful to investors in their assessment of our operating performance and the valuation of our company. Adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA are significant measures used by management for:

 

   

Reporting our financial results and forecasts to our board of directors;

 

   

Evaluating the operating performance of our company;

 

   

Managing and comparing performance internally and externally against our peers; and

 

   

Establishing internal operating targets.

These non-GAAP operational measures, including adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA are used by us as broad measures of financial performance that encompass our operating performance, cash, capital structure, investment management, and income tax planning effectiveness. These operational measures are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. These operational measures have limitations in that they do not reflect all of the costs or reductions to revenues associated with the operations of our business as determined in accordance with GAAP. In addition, these operational measures may not be comparable to non-GAAP financial measures reported by other companies. As a result, one should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to operational measures. The limitations in relying on our non-GAAP financial measures include the fact that the adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA operational measures do not include the impact of stock-based compensation expense or the effects of amortization of intangible assets, acquisition related expenses and restructuring charges. We expect to continue to incur expenses similar to the non-GAAP adjustments described above, and the exclusion or inclusion of these items from our non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent.


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

ATLANTA—(BUSINESS WIRE)—A.D.A.M., Inc. (Nasdaq: ADAM), will conduct its second quarter 2008 earnings conference call on August 14, 2008 at 10:00AM Eastern Time (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 at 12:00 PM ET the same day by dialing 800-633-8284 or 402-977-9140 with reservation code 21389280. The telephone replay will be available until August 28, 2008. To listen to the call online, visit www.adam.com.

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

A.D.A.M. (Nasdaq: ADAM) is a leading provider of health information and benefits management solutions to healthcare organizations, employers, 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. empowers consumers to get smart about their health and wellness, 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.

Consolidated Statements of Operations

Second Quarter, 2008 and 2007

(numbers in thousands, except per share data)

 

     Three Months Ended June 30,     %
Increase

(Decrease)
 
   2008     % of
Revenues
    2007     % of
Revenues
   

Revenues, net:

          

Licensing

   $ 6,330     88 %   $ 5,860     83 %   8 %

Product

     316     4 %     548     8 %   -42 %

Professional services and other

     543     8 %     616     9 %   -12 %
                              

Total revenues, net

     7,189     100 %     7,024     100 %   2 %
                              

Cost of Revenues:

          

Cost of revenues

     921     13 %     1,513     22 %   -39 %

Cost of revenues - amortization

     465     6 %     320     5 %   45 %
                              

Total cost of revenues

     1,386     19 %     1,833     26 %   -24 %
                              

Gross Profit

     5,803     81 %     5,191     74 %   12 %
                              

Operating expenses:

          

Product and content development

     1,197     17 %     1,043     15 %   15 %

Sales and marketing

     2,157     30 %     1,559     22 %   38 %

General and administrative

     1,298     18 %     1,152     16 %   13 %
                              

Total operating expenses

     4,652     65 %     3,754     53 %   24 %
                              

Operating income

     1,151     16 %     1,437     20 %   -20 %
                              

Interest expense

     346     5 %     622     9 %   -44 %

Interest income

     (5 )   0 %     (46 )   -1 %   (a )
                              

Income before income taxes

     810     11 %     861     12 %   -6 %

Income tax expense

     —       0 %     —       0 %   (a )
                              

Net Income

   $ 810     11 %   $ 861     12 %   -6 %
                              

Earnings Per Share

          

Basic

   $ 0.08       $ 0.09      

Diluted

   $ 0.08       $ 0.08      

Weighted Average Common Shares Outstanding

          

Basic

     9,795         9,514      

Diluted

     10,760         10,376      

 

(a) not meaningful


A.D.A.M., Inc.

Consolidated Statements of Operations

Year-to-Date, 2008 and 2007

(numbers in thousands, except per share data)

 

     Six Months Ended June 30,     %
Increase
(Decrease)
 
     2008     % of
Revenues
    2007     % of
Revenues
   

Revenues, net:

          

Licensing

   $ 12,759     89 %   $ 11,559     85 %   10 %

Product

     557     4 %     922     7 %   -40 %

Professional services and other

     996     7 %     1,089     8 %   -9 %
                              

Total revenues, net

     14,312     100 %     13,570     100 %   5 %
                              

Cost of Revenues:

          

Cost of revenues

     1,867     13 %     2,707     20 %   -31 %

Cost of revenues-amortization

     947     7 %     635     5 %   49 %
                              

Total cost of revenues

     2,814     20 %     3,342     25 %   -16 %
                              

Gross Profit

     11,498     80 %     10,228     75 %   12 %
                              

Operating expenses:

          

Product and content development

     2,188     15 %     2,199     16 %   -1 %

Sales and marketing

     4,274     30 %     2,819     21 %   52 %

General and administrative

     2,593     18 %     2,622     19 %   -1 %
                              

Total operating expenses

     9,055     63 %     7,640     56 %   19 %
                              

Operating income

     2,443     17 %     2,588     19 %   -6 %
                              

Interest expense

     818     6 %     1,313     10 %   -38 %

Interest income

     (29 )   0 %     (56 )   0 %   -48 %

Loss on sale of investments

     296     2 %     —       0 %   (a )

Loss on sale of assets

     —       0 %     4     0 %   (a )
                              

Income before income taxes

     1,358     9 %     1,327     10 %   2 %

Income tax expense

     —       0 %     —       0 %   (a )
                              

Net Income

   $ 1,358     9 %   $ 1,327     10 %   2 %
                              

Earnings Per Share

          

Basic

   $ 0.14       $ 0.14      

Diluted

   $ 0.13       $ 0.13      

Weighted Average Common Shares Outstanding

          

Basic

     9,755         9,317      

Diluted

     10,743         10,182      

 

(a) not meaningful


A.D.A.M., Inc.

Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1)

Second Quarter, 2008 and 2007

(numbers in thousands, except per share data)

 

     Three Months Ended June 30,  
     2008
GAAP
   2008
Non-GAAP
   2007
GAAP
   2007
Non-GAAP
    %
Increase/
Decrease
 

Reconciliation of GAAP Operating Income, Net Income and EPS to Non-GAAP measures.

             

GAAP Operating Income

   $ 1,151    $ 1,151    $ 1,437    $ 1,437     -20 %

Stock-based compensation (2)

        178         (42 )  
                       

Non-GAAP Operating Income

      $ 1,329       $ 1,395     -5 %
                       

GAAP Net Income

   $ 810    $ 810    $ 861    $ 861     -6 %

Stock-based compensation (2)

        178         (42 )  

Amortization of purchased intangibles (3)

        188         188    
                       

Non-GAAP Net Income

      $ 1,176       $ 1,007     17 %
                       

Diluted Earnings Per Share

   $ 0.08    $ 0.11    $ 0.08    $ 0.10    

Diluted common shares outstanding

     10,760      10,760      10,376      10,376    

Reconciliation of GAAP Net Income to Adjusted EBITDA is as follows:

             

GAAP Net Income

      $ 810       $ 861    

Depreciation

        106         108    

Amortization of software development

        277         132    

Stock-based compensation (2)

        178         (42 )  

Amortization of purchase intangibles (3)

        188         188    

Interest expense

        341         576    
                       

Adjusted EBITDA

      $ 1,900       $ 1,823     4 %
                       

 

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered as a substitute for comparable GAAP measures and should be read only in conjunction with our financial statements prepared in accordance with GAAP and our press release, which explains our use of non-GAAP measures.
(2) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.
(3) Amortization of customer list and purchased software acquired with Online Benefits.


A.D.A.M., Inc.

Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1)

Year-to-Date, 2008 and 2007

(numbers in thousands, except per share data)

 

     Six Months Ended June 30,  
     2008
GAAP
   2008
Non-GAAP
   2007
GAAP
   2007
Non-GAAP
   % Increase/
Decrease
 

Reconcilation of GAAP Operating Income, Net Income and EPS to Non-GAAP measures.

              

GAAP Operating Income

   $ 2,443    $ 2,443    $ 2,588    $ 2,588    -6 %

Stock-based compensation (2)

        322         239   
                      

Non-GAAP Operating Income

      $ 2,765       $ 2,827    -2 %
                      

GAAP Net Income

   $ 1,358    $ 1,358    $ 1,327    $ 1,327    2 %

Stock-based compensation (2)

        322         239   

Amortization of purchased intangibles (3)

        377         377   
                      

Non-GAAP Net Income

      $ 2,057       $ 1,943    6 %
                      

Diluted Earnings Per Share

   $ 0.13    $ 0.19    $ 0.13    $ 0.19   

Diluted common shares outstanding

     10,743      10,743      10,182      10,182   

Reconciliation of GAAP Net Income to Adjusted EBITDA is as follows:

              

GAAP Net Income

      $ 1,358       $ 1,327   

Depreciation

        215         215   

Amortization of software development

        570         258   

Stock-based compensation (2)

        322         239   

Amortization of purchase intangibles (3)

        377         377   

Interest expense (income)

        789         1,257   

Loss on sale of investments (4)

        296         
                      

Adjusted EBITDA

      $ 3,927       $ 3,673    7 %
                      

 

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered as a substitute for comparable GAAP measures and should be read only in conjunction with our financial statements prepared in accordance with GAAP and our press release, which explains our use of non-GAAP measures.
(2) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.
(3) Amortization of customer list and purchased software acquired with Online Benefits.
(4) Recognition of loss from sale of interest bearing short term investments.


A.D.A.M., Inc.

Consolidated Balance Sheets

June 30, 2008 and December 31, 2007

(numbers in thousands)

 

     June 30,
2008
    December 31,
2007
 

Assets

    

Current assets

    

Cash and cash equivalents

   $ 3,882     $ 5,425  

Short term investments

     —         2,809  

Accounts receivable, net

     3,087       3,940  

Restricted cash

     46       46  

Inventories, net

     49       65  

Prepaids and other current assets

     1,054       839  

Deferred income tax asset

     793       793  
                

Total current assets

     8,911       13,917  
                

Non-current assets

    

Property and equipment, net

     915       801  

Intangible assets, net

     10,119       9,953  

Goodwill

     27,508       27,468  

Other assets

     152       152  

Deferred financing costs, net

     610       852  

Deferred income tax asset

     6,827       6,827  
                

Total non-current assets

     46,131       46,053  
                

Total assets

   $ 55,042     $ 59,970  
                

Liabilities and Shareholders’ Equity

    

Current liabilities

    

Accounts payables and accrued expenses

   $ 2,643     $ 3,658  

Deferred revenue

     5,410       5,676  

Current portion of long-term debt

     4,750       3,250  

Current portion of capital lease obligations

     84       105  
                

Total current liabilities

     12,887       12,689  
                

Non-current liabilities

    

Capital lease obligations, net of current portion

     49       85  

Other liabilities

     909       899  

Long-term debt, net of current portion

     9,250       16,750  
                

Total non-current liabilities

     10,208       17,734  
                

Stockholders’ equity

    

Common stock

     101       100  

Treasury stock

     (1,088 )     (1,088 )

Additional paid-in capital

     57,281       56,406  

Unrealized loss on investments

     —         (166 )

Accumulated deficit

     (24,347 )     (25,705 )
                

Total stockholders’ equity

     31,947       29,547  
                

Total liabilities and stockholders’ equity

   $ 55,042     $ 59,970  
                


A.D.A.M., Inc.

Consolidated Statements of Cash Flows

Year-to-Date, 2008 and 2007

(numbers in thousands)

 

     Six Months Ended
June 30,

2008
    Six Months Ended
June 30,

2007
 

Cash flows from operating activities

    

Net income

   $ 1,358     $ 1,327  

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

    

Depreciation and amortization

     1,163       851  

Deferred financing cost amortization

     241       174  

Loss on sale of assets

     —         4  

Loss on sale of investments

     296       —    

Stock-based compensation expense

     322       239  

Changes in assets and liabilities:

    

Accounts receivable

     852       (951 )

Inventories

     16       (54 )

Prepaids and other assets

     (215 )     573  

Accounts payable and accrued liabilities

     (1,014 )     (1,041 )

Deferred revenue

     (265 )     931  

Other liabilities

     10       (156 )
                

Net cash provided by operating activities

     2,764       1,897  
                

Cash flows from investing activities

    

Purchases of property and equipment

     (329 )     (193 )

Proceeds from sale of property and equipment

     —         7  

Additional cost of previous acquisition

     (40 )     (68 )

Net change in restricted cash

     —         2,148  

Software product and content development costs

     (1,114 )     (610 )

Proceeds from sale of investments

     2,716       —    

Purchase of investments

     (37 )     (87 )
                

Net cash provided by investing activities

     1,196       1,197  
                

Cash flows from financing activities

    

Payment on note payable

     —         (1,500 )

Payment on long-term debt

     (6,000 )     (2,000 )

Proceeds from exercise of common stock options

     554       907  

Repayments on capital leases

     (57 )     (75 )
                

Net cash used in financing activities

     (5,503 )     (2,668 )
                

Increase (Decrease) in cash and cash equivalents

     (1,543 )     426  

Cash and cash equivalents, beginning of period

     5,425       4,446  
                

Cash and cash equivalents, end of period

   $ 3,882     $ 4,872