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 - (BUSINESS WIRE) - 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 2006, with the initial release in the second quarter."
2006 Highlights
- Completed the acquisition and integration of Online Benefits, Inc. in August 2006. Benergy(TM), 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) 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.
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,
---------------------------------
% of % of % Increase
2006 Revenues 2005 Revenues (Decrease)
---------------------- ---------------- ---------------- ----------
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% (a)
---------------- ----------------
Interest expense 726 10.6% 9 0.4% (a)
Interest income (58) -0.8% (119) -4.7% (a)
Realized (gain) loss on
investments - - 40 1.6% (a)
---------------- ----------------
Income (loss) before
income taxes 383 5.6% (405) -16.2% (a)
---------------- ----------------
Income tax expense
(benefit) - - 100 4.0% (a)
Net Income (Loss) $383 5.6% $(505) -20.1% (a)
================ ================
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
(a) not meaningful
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A.D.A.M., Inc.
Consolidated Statement of Operations
Calendar Year 2006 and 2005
(In thousands, except per share data)
-------------------------------------------------------------------
Year Ended December 31,
-----------------------------------
% of % of % Increase
2006 Revenues 2005 Revenues (Decrease)
----------------- ----------------- ----------
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, 16,505 100.0% 10,054 100.0% 64.2%
net ----------------- -----------------
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 & mktg 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% (a)
Interest income (518) -3.1% (349) -3.5% 48.4%
Realized (gain) loss
on investments - - 40 0.4% (a)
----------------- -----------------
Income before income
taxes 2,548 15.4% 1,562 15.5% 63.1%
----------------- -----------------
Income tax expense
(benefit) - - (5,500) -54.7% (a)
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
(a) not meaningful
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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,
-----------------------------------------------
2006 2006 2005 2005
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-----------------------------------------------
Total revenues, net $6,835 $- $6,835 $2,507 $- $2,507
Total operating costs
and expenses 5,784 (689) 5,095 2,982 (485) 2,497
Stock-based
compensation (1) 16 (16) - 485 (485) -
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%
% Increase (Decrease)
-----------------------------
GAAP Non-GAAP
-----------------------------
Total revenues, net 172.6% 172.6%
Total operating costs and expenses 94.0% 104.0%
Stock-based compensation (1) -96.7% -
Amortization of purchased intangibles
(2) - -
Severance (3) - -
Operating income (loss) (a) (a)
Operating margin % (a) (a)
Income (loss) before income taxes (a) (a)
Income tax expense (benefit) (a) (a)
Net Income (Loss) (a) (a)
Diluted earnings (loss) per share
Diluted shares outstanding
Income (loss) before income taxes
Depreciation
Amortization of software development
Amortization of purchase intangibles
(2)
Interest expense (income)
EBITDA
EBITDA margin %
(a) 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,
-------------------------------------------------
2006 2006 2005 2005
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-------------------------------------------------
Total revenues $16,505 $- $16,505 $10,054 $- $10,054
Total operating
cost and expenses13,373 (909) 12,464 8,765 (644) 8,121
Stock-based
compensation (1) 136 (136) - 644 (644) -
Amortization of
purchase
intangibles (2) 288 (288) - - - -
Severance (3) 485 (485) - - - -
Operating income 3,132 909 4,041 1,289 644 1,933
Operating margin % 19.0% 24.5% 12.8% 19.2%
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
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%
% Increase (Decrease)
------------------------------
GAAP Non-GAAP
------------------------------
Total revenues 64.2% 64.2%
Total operating cost and expenses 52.6% 53.5%
Stock-based compensation (1) -78.9% -
Amortization of purchase intangibles
(2) - -
Severance (3) - -
Operating income 143.0% 109.1%
Operating margin % 48.0% 27.3%
Income before income taxes
Income tax expense (benefit) (4)
Net Income -63.9% 64.2%
Diluted net income (loss) per share
Diluted shares outstanding
Income before income taxes
Depreciation
Amortization of software development
Amortization of purchase intangibles
(2)
Interest expense (income)
EBITDA
EBITDA margin %
(a) 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 STOCKHOLDERS' 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, Year Ended December 31,
-----------------------
2006 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
Contact:
A.D.A.M., Inc., Atlanta
Victor Thompson
888-751-1306
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